Prepaid cards usually make Neil Faulkner look glum, but there's a new one that stands out.
My avatar (the cartoon picture of me at the top left of this article) unfairly pictures me as someone who always looks a little bit glum. I look the same in all my articles. Ideally, I'd like one showing me leaping for joy when the stock market is rising, and with my head in my hands when there's a banking crisis. But I'm stuck with looking moody.
When I'm investigating financial products, I'd imagine that my face does often look like my avatar. Most products sound great to start with, but looking at the detail they are at best mediocre and at worst a rip-off.
Although I'm not usually a fan of prepaid cards, there is one new card, the Paypal Prepaid Card, that doesn't make me look glum. (Yes. I know I still look glum. The Fool's artist has just officially refused to draw me a new, happier avatar.)
Paypal's card is not a rip-off, so long as you use it correctly. It is a mediocre product for most of you wise readers, I'd imagine, but it could be a very useful tool for these people:
- Children (or parents who want their children to be more financially independent, but with limited spending money).
- Anyone concerned about fraud (e.g. you don't need to type your bank or debit card details into websites, so your potential losses are limited to what's loaded on the card).
- Anyone who is finding it hard to live within their budgets.
- Anyone who has a problematic credit report who can't get a credit card, or even a debit card!
You preload prepaid cards with money and then you use them just like credit cards. The four biggest differences with credit cards are:
- You can get one even with a terrible credit record.
- You can't get into debt using it.
- You must preload your card (which you can normally do online, in shops or at the Post Office.
- It costs you money to buy these cards, to make purchases with it and to load it with money. (It also costs you money to make withdrawals, although it usually costs you with a credit card, too.)
When you buy things, it work just like a credit card. The maximum you can load on your card is usually £3,000 to £5,000.
The four reasons these cards are unsuitable for most people are:
- You earn no interest on the money you've transferred to the prepaid card account..
- You can borrow for free for around 50 days using a credit card, or longer if you have an introductory deal. This means your money sits in your bank or savings account for longer, earning interest. You lose this benefit if you choose a prepaid card.
- These cards simply cost far too much. Ironic, as prepaid cards are usually targeted at people who aren't good with their money. Credit cards usually don't cost you if you use them correctly.
However, one relatively good point about prepaid cards is that there are not quite as many huge, expensive traps in the small print as there are in credit cards. (Read 12 Ways Your Credit Card Rips You Off!)
Here is a comparison of the five prepaid cards I investigated today, in no particular order, because for the most part their pricing structures are too different to order them from best to worst:
Five Prepaid Cards
Card | Cost to buy the card | Annual or monthly charge | Load charges | Usage charges |
|---|---|---|---|---|
Paypal Top Up Card | £4.95. | Nil. | Nil if you do it online using Paypal. Otherwise it's £1. | UK transactions: Nil. Overseas transactions: 2.75%.* UK cash withdrawals: £2 or more with some ATM providers. Overseas cash withdrawals: £3.* |
NOTES | You can load the Paypal Top Up Card online in 3 clicks, plus in Post Offices and retailers round the country. You can spend money that's in your online Paypal account using the card, which means you can use your account in shops, and even with online retailers who don't usually accept Paypal. | |||
Optimum Prepaid MasterCard (Pay-as-you-go version) | £9.95. | Nil. | Nil if you do it in Post Offices or with bank transfers. | UK transactions: 3%. Overseas transactions: 1%.* UK cash withdrawals: £1.50. plus 2% if more than £50. Overseas cash withdrawals: £3.* |
NOTES | Top up in Post offices and with bank transfers is free. SMS and topping up at other retailers costs money - it varies by retailer. Customer services calls cost £1 per minute! | |||
Optimum Prepaid MasterCard (Pay monthly version) | £9.95. | £4.95pm. | As above. | UK transactions: Nil. Overseas transactions: 3%.* UK cash withdrawals: £1.50 plus 2% if more than £50. Overseas cash withdrawals: £3.* |
NOTES | Top up in Post offices and with bank transfers is free. SMS and topping up at other retailers costs money - it varies by retailer. Customer services calls cost £1 per minute! | |||
The Sun Prepaid MasterCard (Pay-as-you-go version) | £6.49. | Nil. | Free to load in a bank, otherwise 3%. | UK transactions: 3% (min 50p/max £1.50). Overseas transactions: 3%.* UK cash withdrawals: 1.5% (min £1/max £1.50. Overseas cash withdrawals: £2.25.* |
NOTES | You can load the Sun Prepaid MasterCard in a bank, through a bank transfer or online with a debit card. | |||
The Sun Prepaid MasterCard (Pay monthly version) | £6.49. | £4.99. | As above. | UK transactions: Nil. Overseas transactions: Nil.* UK cash withdrawals: £50p. Overseas cash withdrawals: £2.25.* |
NOTES | You can load the Sun Prepaid MasterCard in a bank, through a bank transfer or online with a debit card. | |||
Splash Prepaid Maestro Card | £5 purchase. £5pa. Transaction fee: 2.5% | £5pa | You can do a wage or bank top-up for free. Reload is 3% via Post Office and 2.5% via debit card online (min fee £1.50). | UK transactions: 2.5%. Overseas transactions: 2.5%.* UK cash withdrawals: £1.50, plus 2% over £50. Overseas cash withdrawals: £1.50, plus 2% over £50.* |
*When making purchases or withdrawing cash overseas, don't forget that on top of charges you should consider the exchange rate you get.
Hopefully you'll see that the charges for these cards are much too high when you consider the other ways you can pay for things. Where Paypal's card differs is that it should cost you just £4.95 if you use it properly, and never a penny more. Once you've bought the card, if you always reload it using your online account, and if you use it for purchases in the UK only, and not for cash withdrawals, you'll pay no more money.
Because of those restrictions, the number of people who should get it is limited, but it does have a place in some Fools' wallets. So, finally, there's a prepaid card that doesn't make me look glum.
There are dozens of other prepaid cards, but sadly I didn't have time to look through them all. If you think you've found a good one, please write a comment about it below.