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Prepaid Card FAQs and mPOS FAQs

Prepaid Cards

What is a prepaid card?

Think of prepaid cards as being ‘pay-as-you-go cards’, where you load money onto your card before you use it to spend. As such, you can only spend when your account is in credit and it simply won’t let you go into the red.

You can use prepaid cards in the same way that you would use credit cards or debit cards – to make purchases online, on the high street or over the phone. However, unlike credit cards, prepaid cards do not extend a line of credit to you and cannot be used to borrow money. And unlike debit cards, prepaid cards are not linked to your bank account – in fact, you don’t even need to have a bank account to get a prepaid card.

How can a prepaid card help me avoid debt?

Prepaid cards are a great way to stay on top of your spending without the risk of getting into debt because you're only spending your own funds. Because prepaid card issuers don't lend money, they don't run credit checks or explore your credit history – although you will normally need to provide evidence of your identity and address to register. Each time a credit check is made in your name, your rating falls, so this is a huge benefit of prepaid cards.

Where can I use a prepaid card?

Most prepaid cards carry an internationally recognised scheme logo, such as MasterCard®, Visa® and American Express®. These affiliations allow prepaid cards to be accepted all over the world, online or on the high street, at millions of retail locations.

You can withdraw cash from many ATMs with a prepaid card, but the fees charged to the card issuer for its use will very often be passed on to you, especially if you use an ATM abroad.

Prepaid cards are a great alternative to travellers’ cheques or a pocketful of foreign currency, but it’s important to check the foreign exchange rates that different prepaid cards offer, as these do vary considerably – even between the dedicated ‘travel prepaid cards’ or ‘currency cards’.

How do I load / top-up a prepaid card

Some prepaid cards are disposable and can only be loaded once, while others can be reloaded as often as you want, making them convenient everyday payment tools.

There are many ways to load a prepaid card, including internet banking, transfers from a debit/credit card, transfers from e-wallets, over the counter at bank or Post Office® branches or with cash at thousands of retail outlets displaying the Payzone, PayPoint or epay signs. You can even have your salary paid directly onto your card by a BACS transfer. Many prepaid cards charge for loading, so compare the costs of loading via different methods before deciding upon which prepaid card to apply for.

What fees and charges do prepaid cards have?

Some prepaid cards charge for each transaction and/or a monthly ‘account management fee’. Both of these charges are best avoided wherever possible.

Other fees may include cash withdrawals at ATMs, foreign exchange fees if you use your card abroad, inactivity fees (if you don’t use your card for a long period of time) and account cancellation fees – so it’s worth comparing prepaid card fees before you decide which one’s right for you.

What happens if I lose my prepaid card or if it's stolen?

If your prepaid card is lost or stolen, simply tell your issuer and your card will be stopped. It's worth noting that prepaid card issuers are not bound by Section 75 of the Consumer Credit Act, so they are not obliged to repay any stolen funds, as they would if you were using one of their credit cards. However, some prepaid card issuers voluntarily offer this protection, so that's something to consider before deciding which card to get.

What additional features do prepaid cards have?

All prepaid cards let you shop online, on the high street and over the phone via one scheme network or another, such as Visa, MasterCard or American Express, but many prepaid card issuers are beginning to introduce additional features and benefits such as cash back, credit rating establishment/improvement, contactless payment technology, “money transfer” between multiple cards on one account, rewards, bill payment facilities comparable to a basic bank account, and currency lock-ins for cards designed to be used abroad.

What can I use a prepaid card for?

People use prepaid cards for all sorts of reasons, the primary one being that they're a great way to spend with plastic without getting into debt and without the risk of exposing your bank details during online transactions. Other reasons include:

  • Online gambling
  • Making private payments
  • Foreign travel
  • Business expenses
  • Student budgeting
  • Money sharing
  • Accepting wages payments
  • As an alternative to a bank account

Is there anywhere I can't use a prepaid card?

Prepaid cards can be used anywhere you would normally use a credit or debit card. However, all transactions with a prepaid card must be authorised online, either on the website you’re visiting or at the point of sale in the shop. This means that prepaid cards cannot be used in places without an internet connection, such as on planes, some trains and boats, and at some toll-booths in Europe.

Prepaid cards should not be used for “pay at pump” purchases at petrol stations, for car hire or to pre-authorise payment for hotel rooms. This is because these businesses put a hold on a portion of your card funds as a deposit (up to a few weeks in some instances), which means that even though the money is technically in your account, you will not be able to use those funds.

How do I choose the right prepaid card for me?

This is a growth sector and there are now many types of prepaid card available. Here’s a checklist of key points to consider when deciding which prepaid card is right for you:

  • Is it reloadable or single-use only?
  • Can you use it at an ATM?
  • Does it charge a monthly ‘account management’ fee?
  • Does it charge transaction/purchase fees?
  • How competitive are its loading/top-up fees?
  • How competitive are its foreign exchange rates?
  • How are you protected if your card is lost or stolen?
  • Does it have any additional benefits?

mPOS

What is an mPOS device?

mPOS stands for Mobile Point Of Sale, and (most commonly) comprises a card reader that attaches to a smartphone or a tablet (either physically or via Bluetooth) that allows a merchant to accept card payments anywhere with an Internet connection, verifying each transaction with an on-screen signature or PIN entry.

Who are mPOS devices aimed at?

mPOS devices significantly benefit small businesses and sole traders, especially those who are always on the move, such as plumbers, electricians, builders, outdoor caterers and market stall holders.

Also, retail shops and chains are finding mPOS solutions increasingly useful, allowing sales staff to circulate, build relationships with customers, and take payments anywhere on the premises, rather than remain stuck behind a till.

What are the different types of mPOS devices?

There are two main types of mPOS device: Chip & Signature and Chip & PIN.

Chip & Signature systems predominantly involve inserting a small pocket-sized card reader into the power connector or audio jack of a smartphone or tablet. Such card readers can either read the card’s data from its chip or its mag stripe. Either way, the transaction is authenticated by the customer signing the screen of the mobile device.

Chip & PIN is more prevalent in the United Kingdom and Europe, preferred for its additional security. Chip & PIN mPOS devices are EMV-compliant PIN-entry terminals, as well as card readers, which means that all card schemes are accepted. Most (but not all) Chip & PIN devices connect via Bluetooth to apps running on a smartphone or tablet, which allow merchants to implement and manage transactions.

Which cards can I accept with an mPOS device?

Chip & Signature mPOS card readers generally all take MasterCard credit and Maestro debit cards.

Chip & PIN card readers/terminals will take the above plus Visa credit and debit cards and possibly even American Express and Diners Club.

See our mPOS comparison table for specific details on some of the leading mPOS devices.

What fees and charges do mPOS devices have?

Compared to the fees and charges for many financial services, mPOS costs are reasonably straightforward. There’s often a charge for the card reader/terminal if you want to pay for it upfront, but it’s often possible to rent the device – usually over a 12-month period – or get it for nothing.

Some providers also charge a weekly or monthly fee, depending on whether you have purchased your mPOS device outright or are renting it.

The key cost to consider is the cost of each transaction. This varies from product to product, and can be different depending on whether you’re accepting a credit or a debit card. The best way to compare these fees across different providers is to view our mPOS comparison table, which covers the best products currently on the market.

The apps that manage your transactions are generally free.

How can an mPOS device improve my business?

For sole traders or small businesses, the greatest benefit of having an mPOS device is that you can make a sale even if your customer is not carrying cash. Also, the accompanying apps that control many mPOS devices allow you to manage your transactions, issue receipts (via SMS or email) and generally keep track of your business in a way that you can’t when taking cash payments. Another key reason to get an mPOS device is cash flow; why send an invoice and wait (at least!) 30 days, when you take payment immediately?

For retailers, mPOS devices allow your staff to move around your premises, unchaining them from the cash register, yet still ready to take a payment. This allows greater interaction with your customers, improving their experience of your brand, and increasing your bottom line. Why make a customer queue up to pay for something they’ve already decided to buy? Take the payment there and then, removing the chance that they might change their mind before they reach the checkout.

Where can I use mPOS devices?

You can use an mPOS device anywhere that receives an Internet connection. Almost all mPOS transactions are authenticated online, so either a strong mobile signal is required, or a robust WI-FI connection.

Which smartphone or mobile tablet do I need to be able to connect to an mPOS device?

mPOS devices work with a wide range of mobile phones or tablets, and there are accompanying apps available for iOS, Android, BlackBerry and Windows products.

How long does it take to receive a payment from an mPOS transaction?

The short answer is that it can vary considerably. Some mPOS companies transfer funds into your business account at the end of the same working day, while others can take up to a week. It’s definitely worth reading the small print when you sign up for your mPOS device, just so you know exactly when to expect settlement.

What additional features do mPOS devices have?

The core function of an mPOS device is to allow you take card payments anywhere. Beyond this, most accompanying apps let you send receipts via SMS or email, give refunds, manage your transactions and view your history.

Do mPOS devices keep card data secure?

In a word: yes. All mPOS devices must be EMV-compliant, which means they meet the requirements of the organisation established by MasterCard, Visa, JCB and American Express to ensure security and global interoperability of Chip & PIN cards, point-of-sale devices and ATMs.

How do I choose the right mPOS device for me?

The first thing to do is view our mPOS comparison table and read our reviews of the best products on the market today. The obvious comparison is the cost of transactions, but it’s worth going beyond that before you make your decision, as each product has unique features and benefits which will help you decide which one best suits your business.