Given the financial and political uncertainty facing the UK right now, you’d be forgiven for raising a suspicious eyebrow at the notion that credit cards could be the answer, but let us explain!
Before we get started, we want to make it clear that we recommend credit cards are ALWAYS used responsibly and not simply employed as a crutch for periods of unsteady cash flow. Right, with that out of the way, let’s explain why credit cards could be a fantastic resource for a less financially impactful post-Brexit UK.
If you’re assuming that we’re about to tell you about the virtues of 0% interest cards, think again, as prepaid credit cards are a very different resource that are being utilised by savvy shoppers and tenacious travellers.
What is a prepaid credit card?
As the name might suggest, prepaid credit cards are similar to debit cards in that there is an accessible amount of money loaded onto them, with no offered or implied credit. The difference between these and standard debit cards is that they are not connected to a bank account, meaning that a specific amount of money needs to be loaded onto the account and there will be absolutely no way to overspend. Overdrafts cannot be tapped into and interest-laden loan amounts are not applicable to prepaid credit cards, which is why they are so popular.
Common benefits of prepaid credit cards include, but are not limited to, the following:
- Accounts can be opened in just a few minutes and without any credit checks being carried out.
- There are generally no or very small set-up and account fees.
- Some offer the ability to build a viable credit history.
- They can be topped up quickly and easily.
Who should own a prepaid credit card?
We can think of plenty of people that would benefit from having access to a prepaid credit card, but the most obvious choices are:
People who need to stick to a very specific budget. The vote to leave the EU has thrown up some serious financial questions and people have become a little more focused in terms of living within set budgets. Because of this, anybody looking to maintain or even build a better credit rating could definitely benefit from a prepaid credit card. Imagine being able to load up a card on the first of every month, with all the spendable cash. You’d never have to worry about hitting an overdraft or paying interest again!
· Travel enthusiasts. This is the group of people that we are really going to be talking about in this article, as anyone who has been on the receiving end of a less than fortunate currency exchange, pre-holiday, will know that it can have a serious impact on the enjoyment. We’re going to swing back around to this issue and the connection to Brexit shortly.
Who is eligible for a prepaid credit card?
You need to be at least 18 years old to be eligible for a prepaid credit card, but other than that, there are no criteria to meet, thanks to there being no need for a credit check. It’s as simple as that!
Why are prepaid credit cards so brilliant for post-Brexit Britain?
It’s no secret that currency exchange rates keep fluctuating, so it’s good to know how much money you have and what it can translate into, in terms of cash to use abroad. This is where the intrinsic connection between prepaid cards and overseas travel comes into play.
In the good old days, when the Pound was stronger than it is today and could guarantee you a decent return in terms of holiday spending money, it was common for cash, travellers’ cheques and an emergency debit or credit card to be the only things needed when heading overseas. Now, with the Euro and Dollars both performing in an unsteady fashion against the Pound, those with incurable wanderlust are turning to prepaid credit cards in a bid to guarantee less money being lost to transaction fees, admin costs and interest.
When you consider that you can count on one hand the number of debit cards that can be used abroad without charge, it really does make perfect sense to start looking into fee-free alternatives, such as prepaid credit cards. After all, the last thing you want is to think that you have access to a certain amount of cash, to need it and discover that fees have swallowed lots of it up.
Are there different types of prepaid credit card?
In terms of prepaid cards for travellers, there are three types to be aware of: Euro, Dollar and global cards.
When you load up a Euro or Dollar card, your British Pounds will be instantly converted into the requisite amount of the other currency, leaving you ready to spend and, obviously, you’re best to use these cards either in Europe or America. It is not recommended that you use them in other locations, as your Sterling will need to be converted twice, once to either Euros or Dollars and then again, into the currency of the country you are in. It doesn’t take a degree in financial planning to understand that this could lose you far more money in the long run.
Global cards work in a different way, as your Sterling is held on the card until you need to spend it, at which point it will be converted into the relevant currency, in accordance with exchange rates at that particular time. You could be lucky or not and you won’t know exactly how much money you have accessible at any one point, unless you log into your account and check. At least with a Euro or Dollar card, you’ll know exactly how much cash you have to spend.
Which prepaid credit card is best?
This really depends on what you value most. For some people, having access to a handy smartphone app would be a key selling point, whereas for others, no monthly fees or commission-free currency conversions could be the tipping point.
How to get the best from a prepaid credit card
If you’re going to use a prepaid credit card to guarantee you a better currency exchange, you need to be proactive. The following tips could help you to stay afloat, while others sink in the potential post-Brexit financial mire:
- Load up your card when rates seem good, so you don’t have to worry about falling victim to less attractive ones, last minute.
- Consider choosing your next holiday location in accordance with where has the best currency conversion rate.
- Always pay and withdraw cash in the local currency, NOT in Pound Sterling.
- Stay on top of your transaction fees and keep a running tally of how much cash you have left to spend on your card.
- Make sure that wherever you are planning to visit accepts UK prepaid credit cards in ATM machines. You never know when you might need physical cash.
A safer and far more sensible way to spend abroad, prepaid credit cards offer consumers increased control over their money and a higher degree of security as well. Exchanging money always comes with a certain level of risk and luck, in terms of tapping into the best rate on a certain day, but with Brexit throwing a spanner in the works, in terms of predictable returns, prepaid credit cards really could be a traveller’s best friend.