How to find the best prepaid cards?
What makes prepaid cards so appealing is they're easy to obtain, especially when compared to other payment card types like credit cards. They're also easy to use. Before making payments, you pre-load money to your prepaid card account. If you don't have money on your card account, you won't be able to use it as there's no credit or overdraft available.
There is a wide choice of prepaid cards in the UK, some offer cutting edge technology and benefits like cashback. Others offer specialist functions, for example, budgeting for the family or competitive exchange rates for travel.
Costs, restrictions and uses vary too. Deciding on the best prepaid card for your circumstances can be tricky. So how do you find the prepaid card that's right for you? And, are they really for everyone?
- How much do prepaid cards cost?
- What types of prepaid cards are available in the UK?
- Do prepaid cards have restrictions?
How much do prepaid cards cost?
One of the main factors to consider when looking for the best prepaid card is cost. While some fees may seem small at first, repeated transactions and usage will mean even small fees will begin to add up. We've listed some of the costs you will want to look out for below.
Monthly fees
Prepaid card monthly fees or admin fees can vary between £2 to £5 a month, and some go as high as £10 a month. Some also start with no monthly fee or a low fee. Usually, these are basic card accounts that can be upgraded with more features for a monthly fee.
Sometimes it is worth doing the math, some "free" prepaid cards cost more money due to other fees such as top-up and cash withdrawal fees. Others, like Tesco Pay+ and Wise Multi-Currency Card (formally TransferWise), have no monthly fee.
Setup fee
Prepaid card application or setup fees can go as high as £10, although, in our experience, most are free to apply for - such as Nimbl and the ThinkMoney Account. Some providers may require you to make a minimum top-up for your application to be approved. This top-up or load will be available for you to use once your account or card is activated.
ATM fees
ATM cash withdrawals charges using a prepaid card in the UK vary from £1 to £2.50. However, you will find that most offer free cash withdrawals in the UK. Where ATM charges are advertised as free, limits may apply, for example, the number of withdrawals made in a month or the amount. Where these limits are exceeded, a charge may apply.
Overseas cash withdrawals can be costly. Typically "two" charges apply: an overseas ATM fee and a foreign exchange fee (for converting money). Foreign exchange fees usually are around 3% of the amount, and overseas ATM fees can cost £2 or more.
Some prepaid cards offer a limited amount of free overseas withdrawals. For example, the Wise Multi-Currency Card provides the first two withdrawals up to the value of £200.00 in one month free, and Currensea Multi-Currency Card offers up to £500 a month.
In reality, whether you have a Visa prepaid card or a prepaid MasterCard, you will find you can use these cards at most retailers in most countries. So, it may be somewhat easy to avoid the cash withdrawal costs. On the other hand, if you know you will be using cash machines a lot, it's worth looking for cheaper cash withdrawals options.
Where you need to make an overseas ATM withdrawal, be sure to "accept rates without conversion", and when paying for something while abroad, choose to "pay in local currency" — more on that matter in our guide: What you need to know when using your card abroad.
Transaction fees
Most in-store and online transactions are free when using a prepaid card in the UK. Fees may apply when transferring money out of your prepaid account and sending it to another account. Fees will apply for transactions in a foreign currency, for example, when you use your card to buy groceries in a supermarket overseas and other non-sterling purchases.
As mentioned above, foreign exchange fees are usually around 3% of the amount, where applicable. However, multi-currency prepaid cards (sometimes called prepaid travel cards) offer very competitive exchange rates and commission fees - more on that later.
Top-up fees
Depending on the top-up method you choose, you may have to pay for loading or topping up your prepaid card. For example, you will likely be charged for topping up with a credit card, or at PayPoint and Post Office locations. But you will also often find there are free top-up options, these typically include bank transfers and debit card loads. You may need to regularly top up your prepaid account, so worth looking at the free top-up options to make sure they suit you.
Other fees
Other fees may apply, for example, an inactivity fee for not using your card, cancellation fees, renewal costs and card replacement fees which can be anything from £5 to £10. You should be able to find a full list of fees on the card providers website or otherwise in the Terms and Conditions under fees or card charges or similar.
On our Prepaid Card comparison page, you can compare monthly fees, setup fees, ATM costs (both UK and International) and foreign exchange fees. Thinking about the costs and how regularly you will use your card will help you find an option suited to your budget.
What types of prepaid cards are available in the UK?
There are many different types of prepaid cards in the UK and whether they are beneficial depends on how they are used. Below we've listed the main types of prepaid cards available and what they do.
Everyday purpose prepaid cards
These cards can be used as regular debit cards. They will likely come with basic online banking facilities too. You will be able to load these with pounds sterling to make purchases and withdrawals. Some of these come with added perks, such as cashback for purchases made at certain retailers, like the Pockit Card or the Suits Me card, which offer cashback.
Travel prepaid cards
Travel prepaid cards are often referred to as multi-currency cards, which means these card accounts can hold more than one currency. You can convert what you top up into another currency, such as US Dollars, Euros and more. These tend to have fewer charges when used abroad and often have very competitive exchanges rates when compared to more traditional banks, so it may be considering a prepaid card for holidays abroad.
Prepaid cards for teenagers and children
Prepaid cards like Rooster and Nimbl help teach their children about money, budgeting and being financially responsible from a young age. Parents and guardians can top up these cards and control spending, an excellent alternative to using cash as pocket money. There are other alternatives for children and teenagers, including bank accounts for 16 year olds.
There are other types of prepaid cards. Including credit-building cards that help improve your credit score and retail cards that are usually associated with a retailer offering rewards or points for your shopping. Considering what you plan to do with your card will help you choose the right card for your needs.
Do prepaid cards have restrictions?
All prepaid cards have some form of restrictions, some more than others. It's worth checking the limits as you may find some too restrictive for your needs, or worse, a hindrance to your lifestyle needs.
No credit or overdraft offered
As previously mentioned, you can only spend what you have loaded to your card. There are no credit or overdraft facilities, so it's literally zero when you hit zero balance. Worth bearing in mind if you plan on having regular payments coming out of your account for essential bills.
Balance restrictions
Another restriction is the maximum balance you can hold at any time, some have a maximum annual balance limit too. For example, the Post Office Travel Money Card maximum balance is limited to £10,000 at any one time and a maximum yearly balance of £30,000.
Spending caps
Spend limits on transactions also likely apply. These can be capped on a daily, monthly or yearly basis. For example, the Wise Multi-Currency Card has a maximum daily spend limit of £10,000 and a monthly limit of £30,000. Others are much lower.
Limited protection
Some find the cover and protection offered on prepaid accounts limited. Uk prepaid card accounts are not protected by the Financial Services Compensation Scheme (FSCS) as they fall under e-money. Prepaid cards are also not covered by Section 75 of the Consumer Credit Act 1974. You can find out more in our guide "Prepaid cards: How safe is your money?".
Other limits include cash machine withdrawal restrictions, top-up limitations and limits on the number of additional cards you can have on an account. Some limits on prepaid cards may cause inconvenience and frustration, so it's essential to be aware of these before applying. It's also worth adding that while some view these restrictions as a negative, others apply for a prepaid card due to the restrictions, as they can help avoid overspending and better budgeting.
In summary
Prepaid cards can be helpful in so many ways, offering cashback, competitive exchange rates, family budgeting, credit building tools and more. Even certain restrictions like not having overdraft can be viewed as a benefit by some. It's all down to what you plan to do with your prepaid and how you use it. And like all financial services products, it's worth doing your research and shopping around.
So if you are looking for the best prepaid cards for your lifestyle needs and budget, be sure to know what type of card you want. And, when comparing prepaid cards, pay particular attention to the costs and restrictions.