A prepaid card is like a pay-as-you-go mobile phone - you top it up with money in advance. You use it like any other payment card, in shops or online. Most prepaid cards work at cash machines too.
The difference is that the card isn’t linked to a bank account. You can only spend the money you put on it, so there’s no way of going overdrawn or running up a debt.
You can only spend what you put on a prepaid card - so you can't go into debt.
Charges and fees
Money fitness tip
You could pay £5 to get the card in the first place, 2.5% on everything you spend and an extra £1 fee whenever you top up. Obviously it's best to avoid as many as these as you can.
No two prepaid cards are the same when it comes to fees, so always check before you choose. The fees can include:
- Application fees
- Monthly fees
- Top-up fees
- Transaction fees (for example, 3% of the value of each purchase)
- UK and overseas cash machine withdrawal fees, and
- Inactivity fees – you get charged if you haven't used your card for a certain period of time
Why use a prepaid card?
Prepaid cards are a good way to make sure you stick to a budget. However, they do usually charge fees so they might not be the best solution for you.
They can be a good idea if you’re looking for:
- A way to give children an allowance. When the money runs out, you can choose to top up the card, just like a pay-as-you-go phone. For more ideas visit You, your kids and money on the Money Advice Service's website.
- An alternative to travellers’ cheques. You load a prepaid travel card up with money before you go and you’ll be able to spend it while you’re away - see Money and travelling.
How your money is protected on prepaid cards
The money put on your prepaid card is classified as electronic money, or e-money. This means it doesn’t get protection from the Financial Services Compensation Scheme (FSCS) if your bank or building society goes bust.
This just means you need to be careful not to store lots of money on your card. Put just the amount you need on it for immediate spending, and keep the rest of your money in a bank account.
Picking a prepaid card
You can compare prepaid cards using price comparison websites, but make sure you use more than one as they don't all have the same deals.
We recommend using the below:
Don’t think a prepaid card is right for you?
Take a look at your other options in Plastic cards compared or Basic bank accounts.