Prepaid credit cards (UK)

Unable to get a credit card? Maybe you just don't want to get into debt, in either case a prepaid credit card could be the suitable solution.

What are prepaid credit cards?
A prepaid credit card is like a mobile phone top-up card; you put a certain amount of money on the card then use it to pay for goods. You only spend the amount that you put on the card.
Prepaid credit cards enable you to pay for anything that you'd normally pay for with a credit card, the main difference is you don't take on any debt in the process.

Prepay credit cards are sometimes referred to as guaranteed credit cards because of the ease of getting one, although they're more comparable to debit cards because of the way they're used.

Advantages of prepaid cards

- Ideal for those who can't control their spending; you can only spend what you put on the card, there is no risk of getting into debt.

- Prepaid cards are ideal for kids under 18 who can't legally obtain a credit card; you will be able to purchase goods wherever credit and debit cards are accepted; high street, telephone or on the internet.

- Since there is no credit scoring, approval for a prepaid credit card is guaranteed provided you meet some basic requirements.

- Ideal for travelling; you can spend or withdraw cash from ATM machines abroad with your prepaid card.

Disadvantages

No influence on credit rating
Because there's no borrowing involved, using a prepaid card does not demonstrate your ability to manage debt. As a result, its use will not help you build good credit.
If your aim is to establish or improve your credit rating, you're better off applying for a normal credit card.

Charges
The following are the charges that may apply depending on card issuer:

• Application fees; most prepaid credit cards will incur an application fee, typically £5 - £10.
• Monthly fees; some issuers charge a monthly subscription fee, the fees vary depending on issuer.
• Top-up fees; you may be charged each time you put money on the card. If the fee is flat, you can reduce your costs by topping up in huge amounts of money.
• ATM withdrawal fees; you may also be charged for withdrawing money on an ATM machine. If using your card in the UK, you can avoid this charge by only topping up the card when you need to use it rather than adding the cash that you may need later on.

Alternatives
If you have a poor credit rating and as a result are unable to obtain a normal credit card, you should consider a bad credit credit card; these come with higher interest rates but do not incur as any charges.

If you're new to credit but already have a debit card, speak to your bank, most banks in the UK have credit card schemes for people that a new to credit, whereby you'd get a credit card with a credit limit of around £250, this would subsequently rise depending on your ability to manage the account well.


related to prepay credit cards:
credit cards for people with bad credit - Low interest credit cards - Loans for people with bad credit - bad credit loan