Prepaid Credit cards

Prepaid credit cards - UK

Whether you're unable to get a credit card or you just don't want to get into debt, a pre pay credit card could be the ideal solution for you.

What are prepaid credit cards?
A prepaid credit card is a form of pay as you go credit card onto which you deposit your money, then use it to pay for goods or services just like you would with a normal card. But unlike normal credit or debit cards, you only spend the amount that you put on the card.

Pay as you go credit cards are available to people from all walks of life, and are ideal for teens who cannot legally obtain credit cards. The requirements for approval are very basic, in some cases it is as simple as being a UK resident.

Below is a list of cards and summary of charges. Some cards have both the pay monthly and pay as you go options; see card issuer website for a full list of charges and options:

Card	Card Purchase	Monthly Fee	Transaction Fees	Top up Fee
Splash	£5	£0.00	Purchases: 2.5% Cash withdrawal: £1.50	PayPoint: 3% Post Office: 3% Bank transfer: Free
Sun Tuxedo	£6.49	£0.00	Purchases: 2.95% Cash Withdrawal: 1.5%	PayPoint: 3% Post Office: 99p Bank transfer: Free
Optimum	£9.95	£0.00	Purchases: 2.95% Cash Withdrawal: £1.50	PayPoint: 3% Post Office: Free Bank Transfer: Free
Virgin Money monthly prepay card	£9.95	£4.75	Purchases (UK): Free Cash withdrawal: £1.50	PayPoint: 2.75% Post Office: Free Bank Transfer: Free
Tuxedo MasterCard	£9.95	£0.00	Purchases: 2.95% Cash withdrawal: 1.5%	PayPoint: 3% Post Office: 99p Bank Transfer: Free

Advantages of a pay as you go credit card

- It is easy to meet the requirements, most applicants are guaranteed to be approved.

- No credit check is done, therefore bad credit history is not an issue.

- Ideal for those who want an easy way to control their spending; you can only spend what you put on the card, therefore there is no risk of getting into debt.

- Pre pay credit cards give access to those unable to obtain a normal credit card, this is ideal for teenagers or those with bad credit.

- You are able to use the card in the same way as a normal credit or debit card; high street, telephone and internet purchasing.

- You will also be able to withdraw money from ATM cash machines in the UK and abroad.

Disadvantages

- No influence on credit rating
Because there's no borrowing involved, using a prepaid credit card does not demonstrate your ability to manage debt. As a result, they will not help you to improve your credit rating. If your intentions are to improve your credit rating, you're better off applying for a normal credit card.

- Charges
You can expect to pay various fees for card usage, the fees vary from issuer to issuer, below are some of those fees:

Application fees; most prepaid credit cards will incur an application fee, typically £5 - £10.
Monthly fees; some issuers charge a monthly maintenance fee, this is a major disadvantage if you only use the card once in a while.
Top-up fees; you may be charged each time you put money on the card. On most cards you can avoid this fee by topping up at the Post Office or by bank transfer.
Transaction fees; for every transaction carried out with the card, a small percentage fee will be applied, this also includes ATM cash withdrawal.

Alternatives
- Normal credit cards
It might be more cost effective to use a normal credit card instead of a pre pay card since a normal credit card does not incur application charges or any of the other charges listed above.

- Bad credit credit cards
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 than normal credit cards but do not incur as many charges as pre pay credit cards.