As Ryanair launches its prepaid master card, we ask whether having a prepaid debit card is a good idea or whether there is a better alternative especially for people who are trying to solve a debt problem.
Not having a debit card can be particularly inconvenient especially when you are trying to pay for day to day expenditures such as shopping and petrol and have to remember to take enough cash with you.
Because of this, over the past five or six years prepaid debits cards have become particularly popular with people who are struggling with debt and looking to start a DMP or IVA. This is because if you are starting either of these debt solutions you will often have to open a new bank account.
If your credit rating is poor the bank accounts available to you have traditionally been simple card cash accounts which do not come with a debit card facility. The prepaid debit card was then the ideal solution as you could apply for the card without the need for a credit check.
However before applying for a prepaid card you need to consider both the advantages and disadvantages of these cards.
The disadvantage of a prepaid card
Of course companies such as Ryanair do not launch prepaid debit card services unless there is something in it for them. This something is that they will charge you fees for using the card.
There are normally a number of charges associated with prepaid debit cards and these costs are their major disadvantage.
Each card provider will use different charges however in general you can expect to pay each time you deposit money into your card account. You will also be charged if you withdraw cash.
You may also have to pay a joining fee to start up your debit card account and even an annual account management fee.
If you are using your card regularly especially to withdraw cash, these costs can add up to a significant amount.
The alternative to a prepaid card
The good news is that many high street banks are now giving a debit card with their simple card cash accounts. There is generally no charge for the use of these accounts and the associated debit card.
This means that if you have a poor credit rating and need to open a new bank account, you can now normally open an account which comes with a debit card and enjoy the debit card facility for free.
If your credit rating is poor this development has pretty much taken away the need to pay for a prepaid card.
When is a Prepaid card useful?
Of course, there are still some occasions when having a prepaid card can be useful. One of these may be if you are worried about overspending with your debit card.
A prepaid card will not allow you to spend more than the money you have deposited into your card account. As such if you are the type of person how can get carried away at the bar on a Friday evening, a prepaid card could be the answer.
In addition, some people like the prepaid idea because if the card is stolen or cloned, the opportunity for a criminal to use it is limited.
There can be other advantages too. In the case of the Ryanair prepaid card, you will not be charges a Ryanair booking fee if you use the card to buy flight tickets.
However, unless you are in the habit of buying Ryanair tickets every week, it seems likely that the overall cost of having the prepaid card will outweigh the booking fee charges you save.
All in all, with many high street banks now offering free debit cards as standard with their card cash accounts it seems that the major advantage of being able to get a prepaid card without a credit check has become largely redundant.
After all, if you are already struggling with debt and starting a debt management plan or IVA, why pay for a service which you can generally get for free by opening a non credit checked card cash account with a high street bank which now comes with a debit card?
