What are prepaid cards?

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A prepaid card that lets you pay for things online and in person can be a great way for some people to manage their spending. Here is how they work and how to get one.

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A prepaid card can be used in the same way as a debit or credit card and looks the same too. However, because they don’t let you borrow, they are a great alternative for people who want to keep a firm handle on their spending or have previously been turned down for other types of plastic.

How prepaid cards work

You can use a prepaid card to make purchases or withdraw cash in the same way as a credit or debit card.

The difference is that you can only spend money you have already loaded  onto the card. When you pay money onto the card, it is added to your balance, and this is the maximum amount you can then spend without adding more funds. There is no overdraft facility and you cannot get into debt with a prepaid card.

So, if you had £5 on the card and loaded another £50 onto it, you could spend up to £55 before you need to top it up again.

Payments are rejected if there isn’t enough money on your card to cover them.

Prepaid cards look the same as credit and debit cards and have a 16 digit card number, chip and magnetic strip.

They also have a MasterCard or Visa logo on them. This is the company that processes the transactions.

What are the advantages of prepaid cards and should you get one?

No need for a credit check

As you aren’t able to borrow with them, most  prepaid cards are available without a credit check. This means you should be able to get one even if you have bad credit and have previously been turned down for current accounts or credit cards.

How to spend money

You can use prepaid cards to pay for things with any business that accepts card payments. For example: 

  • In person using contactless transactions or your personal identification number (PIN)

  • Online using your card number

  • By phone or mail order using your card number

You can also:

  • Withdraw cash from cash machines

  • Set up direct debits and standing orders to automatically pay your bills with some prepaid cards 

How to load money onto a prepaid card

You can usually:

  • Send a bank transfer from your current account

  • Sign in to your prepaid card's online account and make a payment from your debit card

  • Pay in cash at a bank, post office or PayPoint store

Other people can also pay money onto your prepaid card by bank transfer. Ask your provider for the sort code, account number and reference number needed to send money to the card.

If you take out a basic bank account, you could have your wages paid directly onto it by your employer. These come with prepaid cards and can be used instead of a normal bank account.

What types of prepaid cards can you get?

You can get prepaid cards that you can:

What they cost

Prepaid cards charge a variety of fees. Fees vary between providers but may include: 

Setting up the card

  • A card purchase fee: The one off cost of first buying the card, which is usually between £1 and £15. Some cards come without this fee or waive it if you top it up with a certain amount.

  • Monthly or annual fees: A set amount charged every month or year until you cancel your prepaid card.

  • Inactivity fees: These are charged on some cards if you do not use your card for a certain length of time, e.g. one month.

  • Additional card fees: Some providers let you take out additional cards for your family or colleagues, but they usually charge a fee for this.

  • Cancellation fees: Some cards charge this when you close your account. Some also charge you for transferring any funds left on the card back to your bank.

Using the card

  • UK transaction fees: These are charged every time you make a purchase on your card.

  • Cash withdrawal fees: Charged every time you withdraw from a cash machine (ATM).

  • Load charges: Some cards charge you for loading cash onto them. Some come with different fees depending how you make the payment, e.g. free by bank transfer, £0.50 online or £1 in person.

These fees are usually taken from your card balance. For example, if it charged £1.50 for a cash withdrawal and you took out £40, your balance would have £41.50 deducted from it.

Transaction fees, cash machine fees and load charges can be:

  • A fixed amount, e.g. £1.50 whenever you withdraw cash

  • A percentage of the amount, e.g. a 3% charge on cash withdrawals would be £3 if you took out £100

Some cards come with a minimum charge, which could be a percentage or a set amount. For example, a card could charge 2.5% on transactions but with a minimum charge of £2.

If you bought something for £30, you would pay the £2 minimum fee. If you spent £200, the fee would be £5 (2.5% of £200).

Most cards charge more if you make purchases, withdraw cash or top up your card abroad. However, cards designed for use abroad usually have lower fees.

Limits on prepaid cards

The amount you can spend is limited by how much you load onto the card However some come with additional restrictions including: 

  • A maximum amount you can add to the card per transaction

  • A maximum total balance that can be on your card

  • A maximum amount you can spend each year, but you can sometimes increase this limit

  • A maximum amount of cash you can withdraw each day

How to get a prepaid credit card

Check your eligibility

You can get a card without being credit checked because prepaid cards do not let you borrow money.

However, you can usually get one, so long as you: 

  • Live in the UK and have a permanent address

  • Can  prove your identity

  • Have not been convicted of fraud

Some prepaid card providers set a minimum age of 18, but others let younger people use them.

Compare cards

Use our prepaid card comparison to find one that offers all the features you need that will cost the least in fees.

Work out what you will use it for in an average month, such as:

  • How much and how often you will pay in

  • The method you will use to add funds, e.g. using your debit card or in person

  • How often you will withdraw cash

  • How often you will make purchases and how much you will spend

You can then work out which is cheapest by adding up the total fees each card would charge you in an average month.

If you want to borrow in the future and need to improve your credit score there are specialist credit builder prepaid cards available.

Apply for it

You can get a prepaid card online by filling out the application form on the provider's website with your personal details. Your account is usually opened immediately if your application is accepted, and your prepaid card and PIN are sent by post.

How long does it take to get a prepaid card?

How to use your new card

You can start using it once you receive the card and your PIN. Here is everything you need to know about how to use and manage your prepaid card.

What are the pros and cons?

  • Widely accepted
  • No credit checks
  • Can help you budget
  • Can usually be used abroad
  • Fees for using them
  • Some transactions not available
  • Less protection than credit cards
  • No way to borrow money

Whether you need a prepaid card for spending overseas, easy budgeting or due to bad credit, we can find the right option for you by comparing some of the best deals around.

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