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Prepaid Cards

Greg Medcraft
16th February, 2015

Prepaid cards can be convenient when you’re looking to buy a gift, or if you’re travelling and don’t want to carry cash with you. But, they do have some limitations that you should keep in mind when using them.

How they work

Prepaid cards are available from financial institutions, retailers, foreign exchange merchants and post offices. They need to be ‘loaded’ with money before you can make purchases.

Some prepaid cards are also known as ‘reloadable cards’, and allow the cardholder to ‘top up’ the amount available on the card. Many cards can be used at a variety of locations, and some can be used with any retailer that takes credit or debit cards.

Things to watch out for

Fees

Fees vary across different card providers but they are usually higher than you would pay at most banks or credit unions for a standard debit card tied to a bank account.

Some fees to look out for include:

  • Fees for loading funds on the card
  • Fees for withdrawing money at an ATM
  • Fees for not using the card for a certain period of time
  • A fee for having a negative balance
  • Currency conversion or overseas transaction fees when you use the card overseas. (You should compare these to the foreign currency exchange rates offered by other currency providers.)

Some merchants may also add a surcharge to purchases made with a prepaid card.

Check what fees apply to make sure a particular prepaid card is a cost effective option for you.

Expiry dates

Most prepaid cards have an expiry date. Card issuers differ in terms of how they treat funds left on cards after the card expires, so always check the terms and conditions.

When your prepaid card expires, the card issuer could:

  • Give you a new card with the outstanding balance, minus a fee
  • Have the funds transferred to an account nominated by you
  • Charge you a monthly fee until the funds are withdrawn or used up.

If you think you might have funds left on an expired card you should contact the issuer to find out if and how you can access the money.

It’s important to read the terms and conditions for the card to know what will happen to your funds both before and after the card expires.

Reloading time lag

If you’re reloading your card, be aware that reloadable amounts can sometimes take a few days to register on the card, especially when you’re loading them overseas. Think ahead to make sure the funds are available when you need them.

Travel cards

Some cards allow only a single currency to be loaded, while others allow for multiple currencies. Make sure the card you choose caters for the currencies you need.

Whether you’re giving or receiving a prepaid card, it’s good to know what to look out for. Visit ASIC’s MoneySmart at moneysmart.gov.au, for more tips to help you make smart choices about your personal finances.

Greg Medcraft
Chairman
Australian Securities and Investments Commission

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