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Prepaid cards look like credit and debit cards with a card number, magnetic strip and chip and offer the same ability to purchase products and services. Importantly though as they are not linked to a bank account or credit facility you can only spend the cash balance that has been preloaded onto the card. We now take a closer look at what prepaid cards are in this article.

Prepaid cards enable you to load the card with cash, and then use it to withdraw cash or make purchases. Once you use all the cash loaded and the balance reaches zero, you can’t use the card to withdraw any more money or pay for any more goods. This means there is no risk of running into debt – there is no credit or overdraft facility and you can’t spend more cash than you have loaded on the card.

This means that prepaid cards work rather like pay as you go mobile phones. You can only use the minutes or texts that you’ve bought with a PAYG phone card and the same applies to a prepaid card. Once the uploaded money has been spent, that’s it – it is useless until you load more cash onto the card.

This approach is particularly beneficial to those people who have a tendency to over-spend on their credit cards and then spend months having to pay high interest costs that increase their unsecured debt each month. You can only spend the money what you have, and for many people that discipline will help them get over the sort of debt problems that a lot of consumers are experiencing in these recessionary times.

A prepaid card has to be purchased, but it is not very expensive, and they are available at many high street outlets and online. Some large companies that are not traditional banks or lenders have moved into Otis market. For example O2 has a very popular prepaid Visa card which is fee free when used in the UK. AS may in the UK know, O2 is a communications company supplying broadband and mobile phone services, however it now offers one of the most popular prepaid cards.

Loading cash onto the prepaid card is also easy. You can add money using web sites or even by texting the card company from your mobile phone. ATM’s on the high street can also be used in the same way as they can be for mobile phone “top ups”. All in all, the, they represent a low cost and efficient method of money handling and management without the hassles of credit checks and monthly payments associated with conventional credit cards.

In order to read more about the advantages of prepaid cards then visit this site. You might also have an interest in prepaid currency cards.