Prepaid Credit Cards compared side by side

Prepaid cards are seen to be the better alternative to debit and credit cards. Consumers can only get access to the money that they already have on the card and there is no risk of getting into debt. However, before you rush out and apply for a prepaid card, you should first be aware of the fees and charges that you may have to pay. Sometimes it could actually be cheaper to apply for and use a credit card than it would be to use a prepaid one.

Set Up Fees and Service Charges

These are the two main fees and charges that you need to be aware of. Set up fees are the amount that is charged to get the card. It is a one off fee and often you will receive some of it back when the account is opened. The average set up fee costs from £5 to £15.

Service charges are either charged monthly or annually. They are the equivalent of the credit card bad credit annual fee. This is charged to cover the cost of maintenance on the account. Not all prepaid card providers will charge this fee. Therefore it would be a good idea to compare your options.

Top Up Fees

Many providers also charge top up fees. Every time that you top up your card, you will be charged anything from 1%-3% on average. As there are several ways to top up, each provider will usually offer at least one free method of top up. It could be through a post office or for SMS top ups. Some providers will also charge a flat fee rather than a percentage. This is one of the main differences between a credit card and a prepaid card; you will not have to py to get the money on a credit card.

Withdrawal Fees

If you wish to withdraw the money rather than pay using the card, it will usually cost you. Again the amount charged could be a percentage of the transaction or a flat fee. The amount will also vary depending upon where you are using the card. If you are withdrawing money abroad then the fee could be much higher than usual.

Purchase Fees

There are some cards that will charge you every time that you make a purchase. It doesn’t matter what you buy, you will be charged a percentage of what you have spent.

Inactivity Charges, Additional Card Charges and Cancellation Fees

If you do not use the card for a set period of time, you could be charged a fee. Not all prepaid cards will charge an inactivity fee. Similarly if you choose to close your account, there are some providers who will also charge you for that.

Finally if you need to request an additional card then that may also cost you. This would apply if your card has been stolen or if you lose it.

Overall prepaid cards can come with some, or all of the fees and charges mentioned above. If you end up with a card that charges all of the fees mentioned then it could be more expensive to use than a credit card would be.