Prepaid Credit Cards look like credit cards, but work differently. You can use them everywhere Maestro, MasterCard or Visa is accepted(depending on the type of prepaid credit card but you can only spend up to the available balance on your card. With prepaid credit cards, you load funds onto your card and use that money to make purchases and get cash - you are not borrowing money from a bank or other financial institution.

Credit on Prepaid Credit Cards

Also known as a Prepaid Debit Card or just as a Prepaid Card, a prepaid credit card is similar to a regular credit card, except that there is really no credit limit as such and that funds available on the card are actually the funds that you have loaded on to the card. So essentially a prepaid credit card is not really a credit card at all. Prepaid credit cards typically come with a whole set of fees attached typically relating to issuance, loading, usage and cash withdrawals. Depending on the plan you choose, you can get a pay monthly or pay as you go prepaid credit card. These cards are especially useful for those with bad credit or a non existent credit history and in such cases, the benefits of prepaid credit cards far outweigh any of these potential extra charges.

Getting Prepaid Credit Cards

The important thing to remember is that a prepaid card does not give you access to credit - so you do not really need to undertake and pass any credit checks as such. This also means that even if you have bad credit, a non existent credit history or even have CCJ's, you are still more than likely to get approved for a prepaid credit card.

However, as with most financial services and products, you still need to provide details to verify your identity and your address (typically a passport, driving licence and a utility bill with your UK address should suffice). Most UK prepaid card issuers can verify your details online to provide you with instant approval and your prepaid credit card would come through in the post in 7-10 days.

The Benefits of Prepaid Credit Cards

Well the main benefits are that prepaid credit cards are available to all regardless of their financial status. There are no credit checks and no bank accounts are necessary to apply for these prepay credit cards. Prepaid Credit Cards allow you to spend without the fear of debt or fraud at millions of retailers online or on the high street.

You can even use them to withdraw cash from ATM’s. Prepaid cards can be MasterCard, Maestro or Visa branded. MasterCard prepaid cards can be used to make purchases in-store, online and over the phone at over 28.5 million locations worldwide and to make withdrawals at over 1 million ATM's worldwide.

Click here for more detailed information on the benefits of prepaid credit cards.

Using Prepaid Credit Cards

As there is no credit on Prepaid Cards, you cannot get into debt but also there is no interest payable on the card which makes prepaid credit cards an outstanding proposition for all. You can get prepaid credit cards for all kinds of things which include

• Travel
• Shopping
• Money Transfer
• Gaming
• Payroll
• Banking (if you do not have a bank account)

and much much more.

Well, they are really the same except that in the case of a prepaid card, you need to load money onto the card before you can start spending and there is no credit. No rocket science involved there.

Prepaid cards work just like a normal debit or credit card, with the exception that all transactions are approved and authorised by the prepaid card provider. So, unlike a debit or credit card, where you could go over you credit limit or overdraft, you are restricted and only able to spend funds that you have available in your prepaid account.

It’s much like a pay as you go mobile phone, where if you run out of credit, you can no longer make calls! Once you have run out of credit in your prepaid account, you need to top-up before you can continue using it.

In actual fact, given that prepaid cards are just like debit or credit cards, you can also top-up your pay as you go mobile phone with your prepaid credit card! No more trips around to the local petrol station to pick-up a top-up voucher!

There are a lot more complicated things in life like trying to arrange online home loans during the recession, understanding debtor finance and factoring, or figuring out what the missus wants but luckily prepaid cards aren't one of those complications and you can get help with the home loans online and debtor finance and factoring; the missus is an altogether different ball game!

Well, quite simply, the safety of carrying a piece of plastic with access to your cash, versus carrying a fold of bills in your pocket, is pretty straightforward.

If you lose the cash or leave it somewhere where it is stolen, it is gone forever. However, If you lose your card or leave it somewhere, unless you put your PIN code on your Card (which you should NEVER do), your money is still safe. You simply call your provider, provide your details and block your card and/or order a replacement.

Contactless prepaid credit cards differ from regular prepaid credit cards in the way the information is read from them by the card reader.

A regular prepaid credit card stores its data on a magnetic stripe that must be physically swiped through a card reader or on a microchip which must be inserted into a Chip & PIN device.

A contactless prepaid credit card, on the other hand, stores its data on a microchip embedded in the card's plastic. The microchip is fitted with a radio antenna that is capable of transmitting the card's data to a card reader without physical contact.

Using radio frequency identification (RFID) technology, a contactless prepaid credit card can transmit data to a special RFID card reader when the cardholder waves his card within a few inches of the receiver.

Who accepts contactless prepaid cards?

Presently, contactless prepaid credit cards are only accepted at select convenience stores, gas stations, movie theaters, and fast food restaurants. The drive behind the contactless card movement is to persuade consumers to use plastic conveniently at places that have traditionally been cash-intensive. Doing so would speed transaction times and reduce lines. While few merchants accept the contactless payments right now, the technology is expected to catch on soon widespread rollouts are predicted in the years to come.

Who issues contactless prepaid credit cards?

Contactless prepaid cards are available from MasterCard PayPass, Visa Contactless and American Express ExpressPay.

Altair Financial Services is one of the leading issuers of MasterCard contactless cards in the UK recently trialled MasterCard contactless cards with limited edition contactless prepaid cards for the 2007 Brit Awards as well as a pilot programme to help deliver the first stadium contactless prepaid card in Europe, the Manchester City FC MasterCard® Prepaid Seasoncard with PayPass™, with MBNA and MasterCard to replace the standard season ticket currently issued to supporters.

• MasterCard Paypass
• Visa Paywave
• American Express Expresspay

With all the negative press and scanning through some of the forum comments, it would be difficult not to think so but the answer is NO. In fact, Prepaid Credit Cards represent a new and exciting payment solution which can be used in pretty much any sector to the benefit of the business or the consumer.

However, being a new market, there is so little coverage and advertising by the industry or banks on prepaid debit cards or "prepaid credit cards" as they are popularly known and with so few banks actually supporting Prepaid Credit Cards at this point, it is quite easy to jump to the conclusion that Prepaid Credit Cards are a scam.

Well, you couldn't be further from the truth on this one. Prepaid card issuers, in fact have much stricter regulations than other electronic card products such as debit cards and credit cards as there is no credit check or bank account required to get one. Since getting a Prepaid Credit Cards is so easy and pretty much everyone who applies, gets one, the regulations around the usage or Prepaid Credit Cards, the issuers and the communication is much stricter especially for those cards available to under 18 years of age.

So why don’t banks advertise prepaid credit cards?

Well, the fact of the matter is that banks are financial institutions which have a duty to their shareholders and stakeholders to make money and Credit cards make a lot of money for banks. Banks seem to be tempted by the idea of Prepaid Credit Cards as an idea and possibly to add unbanked consumers to their customer database but the risk of cannibalising their existing credit card market share with a prepaid card product with much smaller margins, is a commercial no no.

At the end of the day, banks cannot charge late fees, interest rates on balances and/or selling debt onto debt collectors, overdraft fees etc on Prepaid Credit Cards as there is no credit available on Prepaid Credit Cards, there is no overdraft, neither do you receive or pay any interest which means there is no debt.

Hence, the only way banks make money on prepaid credit cards is by charging an initial fee, usually about £10 to buy the card and then a top up or usage fee. However, as the market expands and more and more prepaid card providers and issuers come on board with some branded cards being provided by the largest brands in the market, the margins on Prepaid Credit Cards have decreased even further making the solution even less attractive for banks. Most prepaid credit cards can now be topped up for next to nothing or allow fixed fee withdrawals or allow for free UK or worldwide point of sale merchant transactions - hence, not very attractive as a a revenue stream to banks that are used to credit card revenues.

Do banks have a hidden agenda?

Not really. There is no hidden agenda but there is a commercial decision to be made. It would be great to see some major banks launch a prepaid card solution and the opportunity does exist for them, even if they do not see it.

Altair Financial Services, a leading provider of global prepaid solutions, provide an excellent discussion on how banks could benefit from a prepaid solution but we are yet to see banks make a major move. I guess the simple question for banks should be - what is the worth of a currently unbanked customer to them - when they have assigned a value to this which justifies their involvement, you will see them come on board.

In reality, prepaid credit cards are by far a better deal than any credit card can be for certain customers by choice and for others by need. If one were t compare the true cost of using a prepaid card and a credit card, the prepaid card would almost always win and they have none of the risks associated with owning a normal credit card.

So Prepaid Credit Cards are not a scam, banks do not have a hidden agenda but there is a hesitancy to educate the consumer and support Prepaid Credit Cards by the banks due to fears of cannibalising existing credit card channels and replacing a vastly more profitable revenue stream with a vastly more prudent and customer friendly prepaid card scheme.

Well, it really depends on where and how you wish to use your prepaid card.

If it is for travel, them maybe global acceptance is very important for you. Furthermore, the chances of a MasterCard prepaid card being accepted on gambling, gaming and adult sites is far higher than a Maestro branded card. The flip side is that even in a safe and secure environment, a MasterCard is probably more attractive to fraudsters than a Maestro card. So if you are risk averse and your main usage is for online shopping and or high street usage in the UK, maybe a Maestro card is the right one for you.

There are big differences is card acceptance across the globe, so you need to take great care and ensure the card is right for your needs before making a final selection. If we look at some quick stats on worldwide acceptance, we see

• MasterCard - over 25 million worldwide acceptance locations
• Visa - over 12 million worldwide acceptance locations
• Maestro - over 7 million worldwide acceptance locations

Fully branded Visa or MasterCard travel cards are accepted at millions more merchants around the world. Whilst Maestro and Electron acceptance rates are increasing, there are still many destinations where you would experience difficulties using the card to purchase goods.

Maestro acceptance is continuously improving, and card acceptance is currently around 960,000 locations and internet sites in the UK, and 7 million locations worldwide. Over 100 countries accept Maestro. But, many do not, so be sure to check acceptance before purchasing a prepaid Maestro card for your holiday money or international money transfer. Maestro prepaid cards can be used at the ATM internationally, wherever you see the Maestro or Cirrus payment mark.

MasterCard is currently accepted around the globe at merchant outlets and ATM machines, where you see the MasterCard (or Maestro/Cirrus) sign. You can use your prepaid MasterCard at more than 25 million locations worldwide.

A Visa prepaid card works like a Visa credit or debit card, with the exception that each transaction must be electronically authorised. Your Visa prepaid card is accepted at over 12 million electronic merchant locations worldwide, in over 160 countries. Visa Electron is accepted at over 1 million ATM’s displaying the Visa or PLUS payment mark.

Prepaid cards are not covered by the Consumer Credit Act (CCA) and hence, you don't really have the sort of purchase protection that you have with a credit card and until recently, prepaid card providers had not taken any initiative as such to provide consumers with protection themselves.

However, two prepaid card providers have taken initiatives to provide purchase protection to consumers. They are:

Freedom Prepaid Card with 30-day purchase and payment protectionThe card comes with 30 day purchase protection, 30 day payment protection and an extended 12 month warranty. Read the Freedom prepaid card review to find out more.

Cashplus Prepaid Card with purchase protection The Cashplus Gold prepaid card comes with purchase protection where you get protection if a company you have made a purchase from goes bust as you may be able to get a refund with your Cashplus prepaid card. More information is available on the Cashplus Review page.

A lot of consumers are not aware of the Consumer Credit Act (CCA). As per section 75 of this Act, when a consumer buys something using their credit card, their contract is with both the merchant (retailer) and the company that issues their card. They both have an equal liability if anything goes wrong so the consumer can take action against either of them to get compensation.

This is restricted to goods or services purchased for more than £100, but is extremely beneficial if something should go wrong with your transaction e.g. the retailer goes bankrupt!

The CCA covers everyone with a credit card, but given that prepaid cards do not fall under the CCA, as the bank is not lending money, you are not covered.

Very few prepaid card providers offer this kind of protection. This is also not very important to you if you only intend on using your prepaid card for sharing money with family abroad.

Most of the larger well established prepaid card suppliers undertake fraud liability and will actually provide online fraud protection for the cards, so that you are covered in the eventuality of internet fraud occurring.

Another form of purchase protection is that of damage occurring to the goods. Some cards offer a degree of protection to the consumer, effectively covering the purchases whilst in transit or around the home, for a limited amount of time. This varies from card to card though.

Well, the answer is NO and this can be frustrating as certain purchases like buying your Oyster card require 3D secure verification before payment is accepted.

3-D Secure is an XML based protocol used as an added layer of security for online credit and debit transactions. The 3D Secure protocol was developed by Visa to improve the security of Internet payments and offered to customers as the Verified by Visa service. Services based on the protocol have also been adopted by MasterCard under the name MasterCard SecureCode, and by JCB international as J/Secure.

For your prepaid card to work with 3D secure verified site, the issuing bank and your card must be registered with 3D secure and that is rarely the case with prepaid cards.

Hence, as a word of caution if you see the following logos on a site and it says it requires 3D secure authentication, it is quite likely that you card may not be accepted as a form of payment.

Some prepaid credit cards are available to under 18's

This allows under 18's who would usually not be allowed a credit card or debit card the ability to shop online and use the card as a credit card rather than carrying around cash.

The user can also get used to the responsibility of handling their funds in a more 'grown up' manner, pocket money, cash, earnings can be added to the card and they can spend it accordingly.

Also if a child needs funds on a quick turnaround but are not near a parent / relative, funds can be loaded up on the prepaid credit card remotely by parent / relative.

Yes they do and this is no urban legend.

However, most consumer prepaid cards within the American Express Scheme are available to the US market and there is very limited penetration of AMEX prepaid cards in the UK market yet.

No paper statements are generated with your prepaid card account; so the answer is NO.

However, most prepaid card issuers will issue you with a paper statement if you specifically make a request. There is usually a small fee involved with issuing such a paper statement to you.

So essentially, if you really really want a statement, your prepaid card provider will issue you one but since you have to specifically request them when you want them, it also means that there are no embarrassing statements showing up on your doorstep and how and where you spend your money is pretty much your business.

Yes, prepaid cards do have an expiry date

Your prepaid card is usually valid for either 12,24 or 36 months with a 12 month validity period being the one that most prepaid card issuers provide. You can check this within the prepaid card issuer terms and conditions before applying for your prepaid card.

What will happen when my card expires

In most cases, when your card is due to expire, the prepaid card issuer will send you some form of communication to request that you renew your prepaid card account or apply for a new card. This may be free or may cost you the same as applying for a new card altogether. Some prepaid card issuers may even issue you with a new card automatically and deduct the fee from any balance available on your account.

Once you have a new card, any balance on you card will be transferred to your new card. There is usually no charge for this. However, if you choose not to renew your card, you can request to have any balance funds returned to you. This usually involves a fee and the amount returned is equal to the available balance minus that fee.

It is advisable to check the terms and conditions to ensure you are aware of the validity period of your card, what might happen to the card balance when your prepaid card expires and the fees involved with any balance refunds.

A number of prepaid card providers do strive to cater to non-english speaking audiences.

Prepaid cards are often used by foreign workers or immigrants, for whom they provide a useful means of payment and sending money home to relatives.

Many of the prepaid card sites offer a foreign language site to help those who don't have English as their first language. This is intended to make it easier for them to understand the features of the card and how and where to top up funds as well as provide them with a short summary of the fees and charges involved.

However, this tends to be restricted to the brochure part of the site or the terms and conditions of card usage and application and account management pages tend to be in English.

Hence, in order to provide a truly global experience and convenience to non-english speakers, we reckon there is a fair bit still to be done by prepaid card providers and online businesses in general.

Simply visit our News section to find out all the latest about prepaid cards in the media.

Well, the jury is out on this one but at this point, we think you should steer clear of issuers who offer to do so.

Whilst prepaid credit cards can be a very useful product for those with a good credit rating, many card providers target their prepaid products at those with bad or no credit history. With the number of IVA’s (Individual Voluntary Arrangement) and bankruptcy cases on the increase, there is a growing population in the UK that are unable to get a traditional credit or debit card, without paying extremely high fees.

However, given you are loading your own money onto your prepaid card, and the card issuer is not lending you money, information relating to your prepaid account is generally not exchanged with the credit bureaus (Equifax and Experian). So, whilst you may maintain a healthy balance and operate your account within the card providers terms and conditions, this good history will not improve your credit rating.

There are a few issuers who currently offer those with a poor credit history the "chance" to build their credit history with a prepaid card. Whilst the thought is seemingly "noble" and they have a pretty snazzy looking website, it does tie you into that issuer for a 12 month period and should you want to opt out of that agreement before 12 months, your credit history could be negatively impacted as you would have broken your "credit agreement".

The forums certainly don't seem to regard this initiative highly and words such as "sneaky" and "patronising" have been used to describe the scheme in the past with some forum members being offended by what they view as the issuers assumption that they are "dumb enough" to take this at face value. Watch this space! So at this stage, watch out for any prepaid card provider that offers to help build your credit history but note, your Credit history has no impact whatsoever on your prepaid card application.

There is little proof at this stage to suggest that these cards do actually pass your information onto Experian or Equifax but it does show that Prepaid Card providers are taking on greater initiative to provide a mechanism to help those with a poor credit history.

It's not really about winning or losing but rather about how you play the game!

This seems to be a popular quote until someone actually wins something and then its all about winning usually. Visit our Prepaid Awards Section to find out all about award winning prepaid cards