Credit cards

How do prepaid cards work?

By Rob Goodman

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How do prepaid cards work?

Find out how prepaid cards work and why they can come in handy if you're travelling abroad.

How prepaid cards work

The idea behind prepaid cards is a simple one – you load the card with cash, and use it to withdraw cash or make purchases. Once your balance hits zero, you can't use the card to withdraw any more money or pay for any more goods.

Using prepaid cards

  • Prepaid cards are issued under the Visa and MasterCard network, meaning they're established and widely accepted both in the UK and abroad. 
  • You can preload cards at ATMs, over the internet, via text messaging or by phoning your provider (quoting your debit or details). 
  • You can also buy and load cards at a variety of outlets such as the Post Office.
  • As prepaid cards do not have a credit facility users do not have protection under Section 75 of the Consumer Credit Act if products or services purchased on them are not delivered or are not as described. 
  • However, redress is possible under the chargeback scheme, provided you have a Visa prepaid card. 

Go further: How to find prepaid cards -all the factors you need to consider when choosing a prepaid card 

Prepaid card uses

Holidays – Concerns about theft, pickpockets, fraud and other crimes can dampen some people's enjoyment of a lazy overseas holiday. If this is the case, a prepaid card would at least mean that if the worst happened, all you’d lose is the amount you had pre-loaded onto the card. 

As you can load the prepaid card over the phone or online, for instance, you could manage the amount you have on the card while you're away rather than pre-load your whole holiday budget before travelling.

School trips – Parents might prefer to send their children off on school trips with a prepaid card, which they could pre-load with enough spending money for the duration of the trip, or load the prepaid card on a daily basis over the phone. This may be preferable to handing over a wad of bank notes, which could be spent much too quickly. 

Domestic management – A prepaid card, loaded on payday, could serve as a budgeting aid and be used to store money for the weekly shopping trip or for bills.

  • Last updated: July 2016
  • Updated by: Rob Goodman