Alluring advantages of prepaid cards

[img_assist|nid=7092|title=|desc=|link=none|align=left|width=100|height=75]Prepaid cards are gaining popularity in Europe. The Europeans are predicted to spend €75bn (£59bn) by means of prepaid cards in 2.3 billion transactions every year by 2010.

The matter is that companies emitting prepaid cards offer users a number of advantages they may get along with aquiring their product. It involves preferential currency exchange and credit rating improvement.

The functions of prepaid cards resemble the ones of the ordinary debit or credit cards. People may use them to pay for the goods and services at cash points in most of the shops. The cards are activated after loading the cash and are free of borrowing facilities.

Some secure payment websites such as Paypal accept most of such cards. To reload them you need to use a debit card, pay cash at the Post Office or at shops displaying a PayPoint or Payzone symbol.

Most prepaid cards are emitted by Mastercard and Maestro and the customers can use them anywhere they see the signs in the same way that they would use a credit or debit card.

Many users give preference to prepaid cards because there are no borrowing facilities, there are few, if any, credit checks involved (some just ask for a driving licence and UK address). This means that even those who can't get UK bank accounts, because of residency or credit history problems, can use plastic as most prepaid cards allow customers to load their salary on to the card through the BACS electronic payment system.

"The significance of this is huge for people who have either lost their credit eligibility or for migrants who have no credit footprint at all," says Steve Willey at price comparison site moneysupermarket.com. "The creditbuilder feature enables these people to show credit card, loan and mortgage providers they can regularly make monthly repayments and so build their rating at no extra cost. It helps people take the first step back to credit eligibility."

But it takes just to cast a glance on the reverse of the coin to see that such advantages are not offered out of noble commitment to eliminate problems of the group of people mentioned above. The card provider typically charges the customer when they first get the card, when cash is loaded on it, when purchases are made, or on a monthly or annual basis. Some providers will charge you for replacing or cancelling lost or unused cards, or even recovering a lost pin number.

And the most adverse feature of such services is that there are no protective regulations for prepaid cards operations. Under the Consumer Credit Act (CCA) your debit or credit card issuer and the merchant have equal liability for your product, and you can claim compensation up to £100. But this act does not cover prepaid cards.