Are Prepaid Credit Cards A Scam?
By Hillary Smith • Mar 10th, 2008 • Customer Rating
(5 votes, average: 4.8 out of 5)
Loading ...With so little coverage and advertising by banks of prepaid credit cards available in the UK, it is very easy to jump to the conclusion that prepaid credit cards are a scam. In reality, this could not be further from the truth. Prepaid credit card issuers have much stricter regulations than “normal” credit cards and as such are very clear about all (If any) fees associated. Especially those available to those under 18 years old…
So why don’t banks advertise prepaid credit cards?
The fact of the matter is that banks make VERY LITTLE money from prepaid credit cards as it is impossible for them to charge late fees, interest rates on balances and/or selling the debt onto debt collectors.The only way banks make money on prepaid credit cards is by charging an initial fee, usually about £10 to buy the card and then a top up or usage fee. However, due to the recent explosion of prepaid credit cards, especially for teens, competition has almost eliminated all top up fees. Most prepaid credit cards can now be topped up for free at any post office in the UK.
Banks attach a bad stigma to prepaid credit cards (sometimes called prepaid debit cards) because they simply cannot make any money from them. Some of the newer prepaid credit card issuers also provide you with the exact same protection offered under the credit consumer act.
Do banks have a hidden agenda?
Of course they do! Why spend advertising dollars on a product that is not going to make them any money? They can just as easily advertise a credit card that they charge an annual fee for and and extortionate interest rate for. Prepaid credit cards are simply credit cards, but for the people.
In reality, prepaid credit cards are by far an away a better deal than any credit card. They are cheaper and have none of the risks associated with owning a normal credit card. Consumer education is key here and the sooner the UK starts moving to cheap/free prepaid credit cards to make their purchases online, the better.
If there is any scam in the works here, it is with the banks who issue the high interest rate credit cards, not the prepaid card issuers.
Do yourself a favor, cut up your current credit card, save yourself a LOT of money and get yourself a cheap prepaid credit card.
We have done extensive reviews and have collected customer reviews of the virgin prepaid credit card, the tuxedo prepaid credit card and the credit watchdog’s best buy, the cashplus prepaid credit card.
The Cashplus Prepaid Card 
The Tuxedo Prepaid Card 
The Virgin Prepaid card
Hillary Smith is a director of consumer affairs at the credit watchdog and editor for EndorsedCards. Hillary has dealt with literally hundreds of credit related court cases spends her time either writing for the consumer watchdog.
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Another fantastic article Hillary. The mass manipulation of the consumer has led to a massive credit crisis, not only here in the UK but globally. The US is on the verge of meltdown because of credit card use. It’s great to see so many prepaid credit card companies entering the market here. This is especially good news for people who do not understand how much trouble they can get into when it comes to credit card debt.
I am another firm believer in the prepaid credit card revolution, even my kids have a cashplus card.
Hi Paul, thank for the comment. I agree and I am aware my tone is a little unlike the unbiased tone of this site in general but there appears to be an alarming trend toward getting deep into debt on the back of your credit card and it’s shocking to say the least. Some interest rates, especially for subprime credit card holders are absolute shocking and should be outlawed.
While not all credit cards are bad if managed correctly (They can actually be very beneficial) I think young people, especially those under 18 should stick to prepaid cards.