Certain suppliers also offer cards with a “top-up” arrangement, similar to buying mobile phone credit, where consumers buy cards with codes on them – inputting these codes to your account online will then add that much to your card. In this way, prepaid credit cards are specifically aimed at those who wish to shop online without a credit card, as they cannot be used in ATMs, shops, etc. as many other credit cards can.
Prepaid credit cards are frequently marketed to teenagers as a way of buying things online without recourse to their parents’ credit card. This can be a convenience for the parents too, who may not want to have to constantly use their card like this and prefer that teenagers use their own prepaid credit card.
There is no problem with minors applying for a prepaid credit card – generally, anyone over 13, or sometimes 16, can have one, as there is no actual credit given to the customer. Nevertheless, prepaid credit cards do generally come with the logo of one of the big credit card companies on them – Visa, MasterCard, etc. and has almost all the same functionality as a normal credit card. Like most credit cards, your prepaid credit card will have a PIN you will be required to enter it whenever you are making a purchase – make sure this is kept safe from other people. Avoid obvious choices for your pin – phone numbers or dates of birth etc.
One area to be wary of when signing up for a prepaid credit card is that of fees and charges. Often, running a prepaid credit card can be quite expensive. While there is naturally no question of interest charges, since there is no borrowing involved, many companies do charge high fees on prepaid credit cards, including a monthly fee and a purchasing fee. For prepaid credit cards with a “top-up” facility, you will often pay the charge on the credit – e.g. £15 of credit costs £20 or something similar. It is impossible to avoid paying fees altogether (so it will always “cost you money to spend money”), but it is nevertheless worthwhile to shop around and to look at the fine print.
Some prepaid credit cards will seem cheap at first, but on looking at the details there are many hidden costs. It always pays to do research into financial products. You should also beware of any prepaid credit card that advertises to improve your credit rating. This is always untrue. Since you are not receiving any credit from the company and you are not making any monthly payments on a loan, it cannot affect your credit worthiness either positively or negatively.
Prepaid credit cards offer many advantages over standard credit cards when shopping online. For one thing, they are considerably more secure. If you are afraid of scams and credit card fraud occurring over the internet, then this may be the option for you. With a prepaid credit card, even if your details are somehow stolen, the amount of money you stand to lose is considerably less – at most, whatever is loaded onto it at the time, which is generally well below the credit limit on a normal credit card. Visa and MasterCard cards are zero liability – i.e. you do not have to pay for any fraudulent purchases made on your card.
These types of cards allow you to keep your credit card details safe, and ensure that there is no significant risk, by only loading a small amount onto the card. Prepaid credit cards are ideally suited to secure and hassle-free shopping online, and also ensure you never spend more than you intended to! Similarly, people concerned about their own personal safety may opt for a prepaid credit card as it ensures they don’t have to carry large amounts of cash on their person.
Prepaid credit cards then are an ideal solution to making payments without a credit card, and indeed offer advantages over your standard credit card when shopping online.