Prepaid Credit Cards UK

There’s a lot of confusion around at the moment about whether having a pre-paid credit card will affect your credit rating or not, so we’ve put together a simple question and answer sheet here to help answer some of the more frequently asked questions.

Do I need a good credit rating to get a pre-paid credit card?

No. When you apply for a pre-paid credit card, your credit history is totally irrelevant. Because you put money onto the card before you spend it, you are not being loaned any of anyone else’s money and therefore the company doesn’t need to worry about whether you will pay them back or not, as there is nothing to pay back.

If I have a bad credit rating will having a pre-paid credit card make it better or worse or make no difference?

As a general rule, the answer to this is no. Because the company isn’t lending you money and it’s your own money that you are spending, they don’t report back to the credit bureaus (Equifax and Experian), so it won’t make any difference to your credit history at all.

There are a few exceptions to this rule. The AccountNow pre-paid visa or MasterCard, Eufora Prepaid Card, and the Credit Builder card from Cashplus. All three work in different ways, the simplest being the Credit Builder card from Cashplus, where you pay a fee of £4.95 that’s billed monthly instead of paying per transaction. When you sign up for the card you agree to have it for 12 months, and so you sign a loan agreement to pay the monthly fee for 12 months. Because you are signing an agreement, it is reported back to Experian each month on whether you pay the fee or not, and this WILL affect your credit rating. The other two offer loans in slightly different ways that aren’t normally considered part of having a pre-paid credit card.

It is possible that other cards will come in which will have similar features, in which case, those will also affect your credit rating. Because of this, the best thing to do before you buy a pre-paid credit card is to ask this question of the company that you are buying it from.

If I have a good credit rating will having a pre-paid credit card make it worse?

As with the answer to the previous question, the answer is no, your credit score will remain unchanged by using a pre-paid credit card unless you are using one of the cards named above where you sign a loan agreement, and where they report back to Experian or Equifax.