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Spending With Pre-Paid Cash Card Could Cost You Dear ...

Posted on: Saturday, 24 September 2005, 09:00 CDT

THEY are hugely popular Stateside. And this week the UK's first mainstream pre-paid payment card bounded onto the market.

The new Cashplus pre-paid MasterCard card allows consumers to "load" the card with cash - and only spend up to that amount.

Customers do not need to have a bank account or undergo a credit check and the card is not visually branded as a prepaid product, appearing like any other MasterCard product.

But, while the offering might prove useful to those unable to attain credit - allowing them to pay bills over the phone or internet, book travel and entertainment tickets online and travel without the need for travellers' cheques or large amounts of cash - it comes at a price.

The card itself costs GBP 9.95. Then, consumers can chose between paying a monthly subscription fee of GBP 4.95 or GBP 1 per transaction. On top of those costs, each cash withdrawal from an cash machine costs GBP 2 and the same charge is levied for topping up the card by debit card.

Prepaid payment cards are a trillion-dollar industry in the US and Advanced Payment Solutions (APS), which has teamed up with MasterCard to launch the new card, points to the pay-as-you-go mobile telephone sector as an example of the UK's thirst for pre- payment.

"Cashplus offers a secure payment facility for the millions of unbanked Britons," said APS chief executive Rich Wagner. "It gives them access to ATM machines, it can be used globally and it offers payment options previously unable to them, such as online bill payment."

The firm has signed an agreement with the Post Office that will allow Cashplus cardholder to load cards at its 14,500 branches.

Phil Davies, director of business development at MasterCard (Europe), said: "These innovative and secure cards will play an important role in ensuring that previously unbanked community groups are able to enjoy the convenience and safety of paying with cards. We are witnessing the evolution of a true 'plastic democracy'."

However, purchases on the Cashplus card are not covered by Section 75 of the Consumer Credit Act - meaning consumers will not be protected if they purchase faulty or damaged goods.

Moreover, the charges may outweigh the benefits. If you load the card in the first month with GBP 500, withdraw GBP 100 five times from an ATM, then top up the card from your debit card, you would be hit with GBP 26.90 in fees.

"Scratch beneath the surface and the notion that purchases are 'free' is dispelled," said Richard Mason, director of credit cards at price comparison service moneysupermarket.com. "If you lose your card, you could be charged up to GBP 9.95 and there are many other terms and conditions that make this card even worse."

He added: "It's very rare to see a new product that has no advantages for anyone - but MasterCard has managed to pull it off."

Those who have difficulty in getting a credit card would be advised to take out a Capital One Classic card - aimed at those with poor credit histories - and pay cash onto it instead of using it for credit. Stick within the cash limit and the annual percentage rate - 29.9 per cent - is irrelevant.

Source: Scotsman, The

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