Family life is confusing and messy, hectic and complicated. It can be all too easy for even the best budgeter to throw caution to the wind, and use a debit or credit card unwisely. You think you've enough in your current account to use a debit card, but it turns out you're wrong. And suddenly you're hip-deep in bank charges.
Or you've gone that little bit too far to pay the balance at the end of the month and the interest rates start to build up.
But love cards or hate them, the simple fact is you can't live without some kind of bank card. So what are your options?
When I decided a few years ago, or rather my drastically reduced income following redundancy decided for me, to go without credit or overdrafts I started to look into alternatives.
These are pre-paid cards. They look just like credit cards, and carry the same Visa or Mastercard or Maestro logo you're already familiar with. But you load the card up with cash, and you can only spend what you have on the card.
This makes it a lot easier to keep to your budget and not end up paying out half your disposable income in charges and interest each month. Read on to find out more about the advantages, and also disadvantages, of these cards.
Why do I want one?
The main attraction of pre paid cards is that you can never spend more than you have on the card. They look like credit or debit cards, and they work like credit or debit cards with a chip and PIN number. But unlike a debit card, the transaction goes straight through on your account so you never spend more than you have.
You can get Visa and Mastercard pre-paid cards. At the recent London Olympics, it was only possible to use a Visa c
ard to buy tickets. Many people opted to use pre paid cards for this purpose.
How much do they cost?
Pre paid cards vary in cost. Many will charge you a fee to start with, usually around £10. Then some charge a monthly fee, while others don't. Usually those that charge you monthly have lower fees for other transactions.
It is worth answering these questions when looking at which card to get. How much does it cost to set up, is there a monthly fee, how much are you charged for transactions, are you charged to use an ATM, and are you charged to deposit money into the card.
I use one alongside a basic, overdraft-free, bank account. Although I have to pay around £5 a month, this is much less than the bank charges and interest I used to get stung with on a monthly basis.
One point to note is that I have found my pre-paid Mastercard will not work in a stand alone ATM, only those attached to banks. I'm not sure if pre paid Visa cards have the same issue.
One of the most common reasons I see put forward in favour of pre paid cards is for use online if you are worried about having your information stolen. However, my other half recently had his debit card cloned, and about £300 taken from his account. This was immediately spotted, and the money replaced by the bank. I am not entirely sure you have the same coverage with a pre paid card.
You are not covered by Section 75 of the Consumer Credit Act, I'm afraid. This is the law that says your credit card company will refund you if the goods or services you booked (valued between £100 and £30K) using your credit card weren't received or weren't as described.
A new type of card has popped up recently. These are travel pre paid cards. They work a little like travellers cheques in that you can load the card with a particular currency, but unlike travellers cheques you don't have to pay a foreign exchange rate or commission when you use the cards overseas, if you are using it in the country for that particular currency.
At the moment you've only got the choice of Pounds Stirling, Euros and American dollars. All the cards I looked at did not charge you for use when you are abroad for transactions or at the ATM. These are Tuxedo, CaxtonFX, and Kalixa.