A complete guide to the prepaid card

Prepaid cards are a fantastic tool with a wide range of benefits that you don’t typically get from traditional debit cards.

Whether you’re looking to get better control over your spending, build your credit, or just access a bank account alternative without credit checks, prepaid cards are an extremely versatile solution.

To help you decide if a prepaid card is the right solution for you, we’ll take a deep dive into exactly what prepaid cards are, how they work, and why you might want to consider one. 

What is a prepaid card?

Prepaid cards work just like regular debit cards except you load them with money before using them. You also don’t need to have any type of credit check to get access to one. For example, you can apply to get a prepaid card with Pockit with just proof of address and a form of ID and you could be approved in just three minutes. 

Prepaid cards can help you manage your money because you can only spend up to the amount that you’ve already loaded onto the card. They’re still generally accepted wherever major credit cards are, but they’re linked to an alternative bank account rather than a traditional one. 

The best prepaid cards do still come with features like mobile banking apps to manage your money, make payments, and send funds. This makes them a great choice if you’re looking to simplify your finances.  

Take a look at the table below to understand the key differences between debit cards, credit cards and prepaid cards. 

The types of prepaid card

There are three main types of prepaid cards; 

• Preloaded cards. These are one-time-use cards that have a preloaded amount of value to be used in an online or physical store. They’re non-reloadable and often used as gift cards. 
• Reloadable prepaid cards. These cards work similarly to debit cards but must be topped up with money before you can use them. Once you’ve loaded funds, you can spend them or manage them exactly as you would with a regular bank. Prepaid cards can be virtual only (to use for physical transactions) or physical, to withdraw money from cash points and make payments in-store as usual.
• Credit builders. Credit builders are special prepaid cards designed to improve your credit rating and trustworthiness in the eyes of lenders. They work by taking a very small monthly payment and reporting it to the three main credit reference agencies in the UK. Learn more here.

How do prepaid cards work?

Applying for and using a prepaid card is a fairly straightforward process and is usually quicker and easier than applying for a traditional bank account.

You can apply for a prepaid card online with basic personal information like name, address, and date of birth. You’ll also need a form of accepted ID which will vary from issuer to issuer. This is to prevent fraud as prepaid card issuers fall under the same ‘know your customer’ regulations as banks.

Once you have your prepaid card you need to load your funds. This can be an inbound salary payment, a cash payment at a PayPoint, or a bank transfer from another account using a mobile app.

When that’s done you’re all set to use your prepaid card! Pockit comes with an easy mobile app where you can manage your money anywhere anytime, just like with a regular account. You can also access everything you need at Pockit.com.  

What are the benefits of prepaid cards?

Prepaid cards come with plenty of benefits compared to debit and credit cards. Here are just a few:

A bank account alternative

Prepaid cards offer an easy alternative to a normal bank account with no credit checks. 

This means you can access much of the same functionality (such as instant spend notifications, easy bill management, and streamlined online shopping with Google and Apple Pay). However, you don’t need to have a good credit history to use one. 

Because of this, prepaid cards are a great choice for people who are new to the UK, those who have credit problems, or people with no credit history. 

Share a prepaid card

Joint prepaid cards let you set up multiple people on the same card, making them ideal for shared expenses or family budgeting. Couples can also top up the prepaid card instead of opening a shared bank account and becoming financially linked (which can lead to one person’s credit history reflecting on another’s). 

Get a children's prepaid card

Children's prepaid cards are specifically designed to give parents a secure way to ensure their children have access to funds. You can top up small amounts at a time to help your children learn to budget. 

Travel with your prepaid card

Prepaid cards are great for budgeting for holidays and trips abroad. For example, with Pockit’s prepaid card for travel, you can top up the amount you want to spend while you’re away and then take cash out at any ATM that accepts Mastercard®. You’ll get fast notifications about the currency exchange too. 

You can get an income advance

Through prepaid cards such as Pockit, you can get an income advance. A great alternative to online loans which aren’t accessible to those with poor credit or no credit history, this allows you to access up to £100 of your salary or benefits before payday.  

You can build your credit

Some prepaid cards, such as Pockit, allow you to build your credit rating and improve your financial position. This is ideal if you want to do things like financing a car, getting a mortgage, or taking out a loan.

All you have to do is make regular payments into your account and this will be reported to the three main credit reference agencies (Experian, Transunion and Equifax).

You get extra benefits 

Some prepaid cards come with amazing rewards! For example, with Pockit, you get

• Better deals on broadband, TV, and mobile services
• The chance to win £250 every week (terms apply)
• Up to 15% cashback from leading retailers like Sainsbury's, Argos and Pizza Express (terms apply)

What are the disadvantages of prepaid cards?

Prepaid cards are amazing, but not all of them are created equal. Here we take a quick look at some of the common disadvantages of prepaid cards:

• Limited acceptance. Some prepaid cards are not accepted everywhere so make sure the one you’re looking at is suitable for how you want to use it. Heads up, you can use Pockit anywhere Mastercard® is accepted. 
• No credit building. Unless they’re specifically designed for building credit (like Pockit), prepaid cards usually don’t have an impact on your credit rating. This can be a good thing in some ways, but frustrating if you’re actively trying to improve your financial health. 
• Limited features. Compared to traditional bank accounts and credit cards, some prepaid cards offer limited rewards, benefits, or advanced financial management. 

What to look out for in a prepaid card:

Assess every prepaid card by looking at the key factors outlined below. You can also check out our prepaid card guides for more in-depth comparisons. 

• Features and benefits. Look closely at the features and benefits of each prepaid card. Make sure that the way you load money is suitable for your needs, and ensure that it’s accepted at the places you plan to spend.
• Fees. Look closely at any fees associated with the prepaid card and check whether there is a minimum balance required. 
• Customer support. Choose a prepaid card with reliable support in case you need help with anything. Check reviews to see what other customers are saying.

With Pockit, you could get approved for a prepaid card in 3 minutes with no credit checks. Then you can access rewards every month. Find out more or apply in seconds. 

Prepaid card FAQs

Why would someone use a prepaid card?

Prepaid cards allow people with no credit history or poor credit to access the functionality of a traditional bank account. They’re also great for budgeting and often come with amazing rewards.

Is it easy to apply for a prepaid card?

Yes! Applying for a prepaid card can be done in just a few minutes online. Once approved, you can start using your prepaid card almost immediately. Pockit comes with a virtual card and works with both Apple and Google Pay so it’s perfect for online shopping.

When/why are prepaid cards not accepted?

There are a very small number of situations where prepaid cards are not accepted. Some car rental companies or high-end hotels might need a debit card for a security deposit, but this is increasingly rare and in general, you can use them anywhere. Pockit cards, for example, should work anywhere that accepts Mastercard®. Read a full guide here. 

Do prepaid cards require a credit check?

No, prepaid cards don’t require a credit check. This makes them ideal for people who might not pass traditional credit checks or people with little to no credit history.

Are prepaid cards safe?

Yes, prepaid cards are safe. Since they are designed to allow you to manage your money, prepaid cards are regulated by the same financial authorities as banks, and have the same level of protection built in.

Is your money protected when using a prepaid debit card?

Yes, prepaid cards like Pockit come with fraud protection and dispute resolution services. On the Extra and Fast Track to Credit plans, you also get access to purchase protection insurance which works similarly to section 75 (for credit card refunds) to help you get a refund or replacement if you encounter issues with your purchases. 

Is an ATM card a prepaid card?

No, an ATM card is normally linked to a bank account while a prepaid card is loaded with funds and not associated with an account. You can use both to withdraw cash, however.

What is a prepaid debit card, UK?

Prepaid cards are not technically debit cards even though they carry many of the same functions and features. This is because they are not linked to a traditional bank account like debit cards are.