Are Prepaid Cards the Right Option for You?

How do you pay for things? If you’re like many Australians, you are most probably choosing to pay by card rather than cash. In fact, according to a report from the RBA, 52% of payments made in 2016 were by card compared to 37% using cash. As part of the cashless society that we are embracing, the prepaid card industry has emerged as a powerful tool for consumers. Let’s look at what makes them so appealing and the risks to look out for.

How do they work?

Unlike debit and credit cards, you do not spend directly from your account; instead you “load” money onto your prepaid card and use it to pay similarly as an EFTPOS transaction with a PIN. Once the money runs out, you cannot spend any further until you have topped up. They are available from financial institutions, post offices, foreign currency merchants and Australian post offices.

Why get one?

  • Whether your credit rating is tarnished or deserves to be celebrated, it doesn’t matter. According to unsecuredbusinessloans.com.au, rather like unsecured business loans for small businesses, there is “no paperwork or personal credit checks to get started.”
  • There is no credit facility so you won’t fall into the sinkhole of debt. Your spending is determined by the amount of money on the card.
  • You are in control of the cards’ spending limits and can steer the ship to further top-ups via text, phone or bank transfers.
  • These can be an ideal way to make more secure online purchases, as there is no access to your personal bank accounts.
  • Traveling with no cash is made easy with prepaid travel cards. These can be issued with single or multiple currencies and can be used in stores, or to make ATM withdrawals.
  • It’s a great way to teach teenagers and younger family members how to save and use their money without getting into the negative. ASIC has further advice on this.

Final Thoughts

As we continue to journey into the cashless realm in Australia, prepaid cards have their place with a plethora of benefits. However, consumers need to be savvy and research all their payment options to ensure fees, charges or other costs don’t eat up their bottom line. Happy shopping!

Author bio:

Theresa Manning is an Australian writer and uni student living in Sydney. As an accounting and finance student she specialises in personal finance and taxation related topics. Theresa Manning has a passion for gourmet food, regularly taking breaks from studying and writing to explore the local produce of the Hunter Valley.