Prepaid Debit Card Basics

Debit card use has exceeded credit card use far earlier than expected and the debit card is now the king of the electronic payment mountain. The success of the debit card is attributed primarily to the fact that it can offer anything the credit card can offer, but with far lower costs. In addition, debit cards are relatively easy to obtain and almost anyone can afford them.

There are several kinds of debit cards, and the best of these is the prepaid debit card. The prepaid debit card may therefore be considered the king of kings of the electronic payment mountain. The prepaid debit card is the best tool to afford during these tough times brought about by the perilous global financial crisis. To help people maximize the great potentials of the prepaid debit card its basics are explained below.

Introduction to Prepaid Debit Cards

Prepaid debit cards in terms of appearance are just the same as ordinary debit cards and credit cards. Prepaid debit cards in much the same way, can also be used to withdraw cash and purchase products and services. The real difference is the source of the money spent on the debit card transactions. In case of credit cards, the money spent is not yours but is lent to you by the credit card provider, which of course you’ll have to pay at a later date with interest, thus may cause amassing debts. Ordinary debit cards use the cardholders own money deposited in his debit card bank account, but still, overdrafts may occur which cause costly charges. With prepaid debit cards, there is a preloaded amount on the card and you can only spend up to the balance of the card, therefore providing no chances of going into debt or incurring expenses due to overdrafts.

The prepaid debit card upon receipt may or may not have money already credited in it. Along with it will come a PIN code which you should change immediately to one which your can easily remember. You money can be loaded onto a prepaid debit card by cash at a bank, post office, at Payzone or PayPoint terminals or via a bank transfer. With enough credits, the prepaid debit card can then be used for purchases and withdrawals from ATMs.

Main Advantages of Prepaid Debit Cards

Availability – there are generally no credit check or screening procedures conducted on prepaid debit card applicants, and thus you can easily get one without having to worry about your credit history. The only test to be done will be the identity check aiming to confirm you are who you claim you are.

Control – you can easily manage your spending with a prepaid debit card as you can plan how much credits you will have transferred to your card, as well as the time of transfers. You can also get a full breakdown of the card spending so you can trace what was purchased, from where and when. The breakdown can be used to assess your spending and make necessary adjustments to your budget.

No Risk of Debt – since you are limited to spend only the amount you have put in your prepaid debit card, there is no chance of falling into debt because of spending too much with it.

Great for Travel – a prepaid debit card is great for people going overseas whether for short or long periods as it is more secure than carrying cash and more convenient than using personal checks. It is also good for minors going on offshore field trips as their parents can load the card up anytime.

Prepaid Debit Card Fees

Prepaid debit card providers like all businesses transact for profit, and so there are certain expenses related to prepaid debit cards. The number and range of expenses vary depending on the provider. It is common sense of course to choose a card with fewer and lesser costs but provides greater convenience. Prepaid debit card related expenses may include, but are not limited to the following:

Card Application Fee

Some providers levy an application fee but read the small print as it may be waived if you load more than a certain amount onto the card.

Monthly Service Charge

Check to see if there is a monthly subscription fee, and the related benefits provided in return for this fee.

Customer Call Helpline

Calls to the customer helpline can be expensive so it's worth noting whether you will be charged at a premium rate, national rate or standard rate. If possible, look for those that have toll free customer service hotlines.

Credit Card/Cash Loading Fee

Some providers charge you every time you put money onto the card.

Deposit fee

Even if your card provider doesn't charge you for making a top-up, if you put money onto the card in a bank, the bank may charge for the service. If such a fee applies use an alternative way of loading up your card – if there isn't a convenient alternative it's probably worth considering a card from a different provider.

ATM Withdrawal Fee

Some prepaid cards are treated like credit rather than debit cards when it comes to making cash withdrawals. If you will be charged a fee for withdrawing money from an ATM it is advisable not to use the card for this purpose. And even if you are not charged for making withdrawals in the UK, check what the rule is for foreign transactions as you may be charged if you withdraw money from a cash machine abroad.

Purchases and internet transaction

Is there a charge when you purchase goods on your card and do these vary for online transactions? Again, as with withdrawal fees, these costs may be higher if the transaction is made overseas.

Account Termination Fee

Determine if there is a charge for termination of your prepaid debit card.

Card Replacement Cost

One of the attractions of prepaid cards is the security they offer, but if you lose your card or have it stolen, some providers will charge for a replacement.

Card Renewal

Like a credit or debit card, a prepaid card will have an expiry date so check to see if you will be charged for a renewal.

Inactivity Fee

Some firms charge a small sum if the card is not used for a defined period of time.

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