February 7, 2006

Prepayment cards, which are popular in the US , are expected to become more popular here in the UK.

Existing prepayment cards include Cash2Go, Mastercard’s Cashplus and Amex travellers Cheque card are about to be joined by some new kids on the block, I-money, Speedcard and I-travel card.

The prepayment card is aimed primarilly at consumers who do not have a bank account or do not have a high enough credit rating to apply for a credit card.

Although the concept of a prepayment card is sound, the inability to increase a consumers exposure to high debt is a definate bonus, people should be made aware of the higher charges involved in using a prepayment card. All cards are able to withdraw cash from an ATM machine which carries a fee usually around 85 pence per withdrawal. The Cashplus card carries a £2 fee for ATM withdrawals which is very expensive.

The advantages of a prepayment card is the ability to control your debt, less hassle if you take it abroad and is a godsend for those who are unable to get a credit card. The main disadvantage is the running costs which can mount up over a year.

It is hoped that with the UK credit card issuers starting to recognise that there is a market in prepayment cards, more companies will come out with offers thus increasing competition and hopefully bringing costs down.