Depending on the card, you’ll be charged for taking one out, or for loading money on to it, or every time you use it. Some cards may even charge for all 3, but if you compare prepaid credit cards carefully you should be able to minimise the fees to some extent.
No Consumer Protection
With a credit card you can claim back from the issuer if a mail order or internet purchase goes wrong and you don’t get the products, or if the products are faulty or otherwise not fit for purpose. A prepaid card offers no such protection.
No Financial Protection
If you have cash in a bank account, you’re covered if your bank goes bust and you won’t lose any money. Once you’ve transferred funds to a prepaid card, they are at risk if the card issuer goes out of business. Because of this, only transfer small amounts at a time.
Slightly Limited Usage
While prepaid cards can be used more or less anywhere that a credit card can, there is one specific instance where they can’t be used. This is when you need to get an authorisation for an amount without actually having the money taken from the card. Examples include reserving a hotel room without actually paying when you check out, or paying a deposit on hiring a car which would be refunded upon return of the car undamaged.