What is a prepaid card and who can use them?

Prepaid cards are plastic payment cards, similar to debit or credit cards. You load cash onto them and then use them to make payments or withdraw cash anywhere that you would with a debit or credit card. You can only use however much money you load onto the card. It is like a pay-as-you-go phone, where you have to top up your credit in order to keep using it. There are no credit checks when you apply, so they are helpful for anyone who has a poor credit history. They are also good for children and young people in school who can learn to manage money without overspending. Prepaid cards do not come with bank accounts, but they sometimes offer facilities like direct debits.

What are the pros and cons of prepaid cards?

The main benefit of a prepaid card is that you can only spend what you put on it. This helps with budgeting so you can develop positive habits regarding your financial management. Mastercard and Visa usually issue the prepaid cards, so you can use them wherever their cards are accepted. Some prepaid cards come with bonus benefits like cashback or discounts. The money that you load on the card is protected by ringfencing. However, it is not covered by the same fraud protection laws as debit or credit cards. If the card provider goes bust, then you will not be able to recover your money from them either. There will also be restrictions on how much you can load onto the card or spend at once, and how much cash you can withdraw from an ATM. Additionally, there are fees you must consider.

How much does a prepaid card cost?

Although they do have their conveniences, prepaid cards may not necessarily be a better option than regular debit cards. There are often plenty of applicable fees which can make using the card more expensive, depending on your spending habits. First of all, there may be a one-off application fee when you first sign up for the card. It could be free, or up to around £10. Keeping the card open may be free, or there could be a monthly fee. This may be around £2 – £5. Prepaid cards are valid for 3 years before they require renewing, like debit and credit cards. There could be a renewal fee at this time, which is likely to be the same as the original application fee. The provider could charge a small fee for inactivity if you do not make any transactions with the card for a certain length of time. They also will most likely charge a fee every time you load money onto the card, make a purchase with it, or withdraw cash at an ATM. This is usually around 2-3% of the amount. As well as transaction fees, you may have to pay a redemption fee if you want to get money back off the card. You will also have to pay for a replacement card if you lose the original.

Ten of the Best Prepaid Cards

POCKIT

Pockit is a contactless Mastercard which is one of the most popular prepaid cards. If you get a Full account with Pockit then you can pay up to £5,000 per month onto your card. There is a Pockit app which is free to download and has good reviews. This makes it easier to manage your Pockit account and the money on your card on the go.

• Application fee: 99p
• Monthly fee: 99p (if you spend less than £500 a month)
• Top-up fee: Free by debit card or bank transfer and 99p by cash
• ATM fee: 99p (in the UK)
• Transaction fee: Free
• Overseas fees: 4% foreign exchange and £2.25 cash withdrawal
• Benefits: Up to 10% cashback at selected retailers (including M&S, New Look, and Pizza Express)

OPTIMUM

Another contactless card from Mastercard is the Optimum prepaid card. There is also a mobile app with passcode protection. You can download the myOptimumCard app for free. However, according to many user reviews, it is not a very good app. You can transfer the balance and get a new card if yours is stolen when you report it immediately.

• Application fee: £5
• Monthly fee: Free
• Top-up fee: Free by debit card, bank transfer, or standing order and £1.50 by cash
• ATM fee: 2.95% (in the UK)
• Transaction fee: Free
• Overseas fees: 2.75% for transactions abroad
• Benefits: Can transfer money between Optimum cards (such as family and friends)

CASHPLUS

Cashplus is another Mastercard-issued card. There is a Premier Business version with a £69 set-up fee, which is available in dollars and euros as well as British pounds. The standard Cashplus card is cheaper to set up and use. You can use their virtual loan feature to build up your credit score, but you risk damaging it if you miss repayments.

• Application fee: £5.95
• Monthly fee: Free
• Top-up fee: Free by bank transfer and 0.25% by cash (after first £1,000)
• ATM fee: 2.95% (in the UK)
• Transaction fee: Free
• Overseas fees: 2.99% foreign exchange and £3 for cash withdrawal
• Benefits: CreditBuilder facility, free purchase protection, cashback (including Tesco and Boots)

BREAD

Giving a new dimension to “let’s get this bread” is the Bread card. It is another pay-as-you-go card with no credit checks or overdrafts. You can top up the card directly with your wages and get free balance updates by text. You can view your transactions online to check your balance and card activity. There is a maximum balance of £3,500.

• Application fee: £7.50 (£10 by text message)
• Monthly fee: Free
• Top-up fee: Free for BACs or cash at the Post Office, 3% for bank transfers or cash at a PayPoint
• ATM fee: £1.50 (in the UK)
• Transaction fee: 2%
• Overseas fees: 2.75% foreign exchange and £1.99 for cash withdrawal
• Benefits: £5 bonus when you sign up, cashback with hundreds of online retailers

TUXEDO

Tuxedo offers two types of prepaid card. The pay-as-you-go card is good for general use and the fees below apply. Otherwise, you could opt for their Pay Monthly card. It costs the same to apply but there is a £4.99 monthly fee in exchange for free transactions and 50p per ATM withdrawal. This might cost less overall if you use the card more.

• Application fee: £9.95
• Monthly fee: Free
• Top-up fee: Free by bank transfer or debit card, 99p at a Post Office or 3% at a PayPoint
• ATM fee: 1.5% (minimum 99p and maximum £1.50)
• Transaction fee: 2.95% (minimum 50p and maximum £5)
• Overseas fees: 2.95% foreign exchange and £2.25 for cash withdrawal
• Benefits: Easy online account management, two types of tariff available

REVOLUT

The Revolut card is a potentially revolutionary alternative to the usual digital banking options. Around 4 million customers are currently taking advantage of the lack of fees with this card. If you want more features, then you have to pay a monthly fee for a Premium account. This includes higher limits, insurance, and cryptocurrencies.

• Application fee: Free
• Monthly fee: Free
• Top-up fee: Free
• ATM fee: Free up to £200 then 2%
• Transaction fee: Free
• Overseas fees: No fees in more than 130 countries (up to £200 then 2%)
• Benefits: Budgeting and saving facilities, instant notifications, set up recurring payments

FAIRFX

The Everywhere card is a currency card from FairFX which is the ideal pre-paid card for people who travel. It is only possible to top it up online, so you cannot use cash. You can get your money back for a £5 refund fee if you return from travelling and no longer want to use the card. It is free to use in the UK. There are euro and dollar versions too.

• Application fee: Free
• Monthly fee: Free
• Top-up fee: Free by bank transfer or card
• ATM fee: £1 per withdrawal
• Transaction fee: Free
• Overseas fees: 1.4% or 1.75% if in a different currency
• Benefits: Automatic currency conversion at local exchange rates, 3.5% cashback with UK brands

ICOUNT

As partners of Cashplus, iCount offers similar options and uses. The iCount card also has a CreditBuilder function if you wish to use this. There is a pay-as-you-go option with the fees below, or a pay monthly option for £9.95 per month. That version has no-fee transactions and cheaper ATM withdrawals in the UK. The other fees are the same.

• Application fee: £4.95
• Monthly fee: Free
• Top-up fee: Free electronically or 99p – £3 in stores
• ATM fee: 75p per withdrawal in the UK
• Transaction fee: 2.5% (minimum 25p)
• Overseas fees: 2.99% foreign exchange and £1.50 per cash withdrawal
• Benefits: Up to 4 additional cards, £5 cashback for joining and retailer rewards

VIRGIN MONEY

Virgin has businesses in many sectors, and finance is one of them with Virgin Money. There is a one-off fee when you buy the card, but if you opt for Pay Monthly instead of pay-as-you-go then it will cost £4.75 per month. This is better if you want lower transaction fees for frequent use. You can monitor Virgin Money cards online quite easily.

• Application fee: £9.95
• Monthly fee: Free
• Top-up fee: Free by debit card or bank transfer or at a Post Office and 2.75% at a PayPoint
• ATM fee: 2.95% in the UK
• Transaction fee: 2.95% in the UK
• Overseas fees: 3.5% foreign exchange rate and £1.50 per cash withdrawal
• Benefits: Up to 4 additional cards, discounts with Virgin companies

U ACCOUNT

Have you ever heard of an Unbank account? The U account is an alternative to a current account at a regular bank. This allows payments in and out, including cash deposits and direct debits. It comes with a pre-paid Mastercard with contactless functionality. There are free tiered pricing options for U cards, starting from the fees shown below.

• Application fee: Free
• Monthly fee: Free
• Top-up fee: Free by debit card or bank transfer and 3% with PayPoint
• ATM fee: £1 in the UK
• Transaction fee: Free in the UK
• Overseas fees: 3% foreign exchange rate and 3% + £1 on cash withdrawals
• Benefits: Well-designed mobile app, online customer support, add extra accounts for £1 each a month