Why We Love Prepaid Cards (And You Should Too!)

When prepaid cards started to emerge around 2001, for many they were just a stop gap until they managed to obtain a high street account, or a card they could use for online shopping if they didn’t have a debit card with their own bank.

Fast forward 15 years and the market has changed considerably. Since the global financial crash of 2008-2009, the banks tightened up their lending criteria and many people found themselves with significant financial difficulties, subject to insolvency, or opting for bankruptcy.

It left a huge section of society being turned away by the high street banks when applying for an account as they could not pass the banks’ more rigid credit checks. This is when the prepaid card market really came into its own.

For a while it was just a basic payment card that you loaded with electronic money so you could purchase items.. But in some cases, card issuers went on to gain their own sort code and account numbers, giving them pretty much the same payment transaction functionality  of a high street bank account and started to become a viable alternative to the norm, and many people now use them as their main account.

What are the benefits of prepaid cards?

prepaid cards

No credit check

As prepaid account issuers do not offer credit there is no credit check required to open them. However, you will still need to provide acceptable ID and be a UK resident that is 18 years old or above in order to comply with Money Laundering Regulations.

You can’t get into debt

As there is no credit facility provided by the prepaid account issuer, it’s harder for you to get into debt, and you can only spend the money you load onto the card.

You’re in control

All you need to do is top up your card when you need to via BACS payment,  bank transfer, Post Office or Epay.

Improve your credit rating

Some prepaid cards enable you to apply for a small credit facility issued by a separate credit issuer that could improve your credit rating. These “creditbuilder” products can loan you the equivalent of the prepaid account fees by way of a fixed term loan. At the end of the fixed term loan (normally twleve months), the monthly loan repayments show up as an honoured credit agreement on your credit file… Of course you have to keep up with the monthly payments for the whole twelve months otherwise it could have a negative impact on your credit score.

Use as a basic type of bank account

Prepaid accounts are now a viable alternative to a traditional bank account and are a new way to manage your money. With some prepaid accounts designed for everyday use, there is no need to have a high street bank account as they enable your wages to be paid directly onto your card account and allow you to top up by BACS, bank transfer, at any UK Post Office branch or via Epay.



Prepaid cards work in the same way as a debit or credit cards, so you can use wherever you see the relevant Acceptance Marks whether that be MasterCard® or Visa®. Some prepaid accounts offer a free currency card for foreign travel. You can also buy them separately and they don’t have to be linked to a prepaid account, the cards are issued in specific currencies, so check carefully to make sure the card you have chosen covers the currency you require.

Prepaid cards for teenagers and students

Some providers will allow you to add additional card holders which can be handy if you have teenage children. This can give your child a great sense of independence whilst teaching them how to manage finances without the risk of them running up any bills and getting into debt. Alternatively, you may want to add a partner, a carer or even a friend if you wish.

Cashback offers

A lot of prepaid cards offer cashback reward schemes for purchases you make on the card, particularly online.

The differences between prepaid cards and bank current accounts

Prepaid accounts do not offer cheque facilities nor interest on funds placed into the account. They are also not covered by the Financial Service Compensation Scheme, but electronic money issuers do have to legally “safeguard” their customer funds (under the Electronic Money Regulations 2011); for example, by placing them in a separate high street account from where the funds can be repaid to customers before other creditors if the issuer became insolvent.

So there you have it, not just the top up card any more, some people may even consider them better than the traditional high street banks. Whichever your preference, it is good to know that there is an alternative to traditional banking out there.

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