Prepay to avoid credit card debt

Prepaid credit cards are becoming increasingly popular, possibly as more people try to keep spending and debt under control.

Around 2.3 million British consumers currently have a prepaid credit card, a figure expected to rise to seven million by 2010, according to Fair Investment.

Prepaid credit cards, which allow consumers to load cards with money without tying them to a bank account, are often associated with those with bad debt and are unable to get a regular credit card, the information provider said.

However, statistics suggest other consumers are using the cards as a means to stay debt free or as a part of a debt management plan.

Phil Alcock, credit card expert at Fair Investment, said: “You top up the card with money and then use it to pay for goods, safe in the knowledge that you can never go overdrawn or into debt.”

Online payment provider PayPal has recently launched a prepay card which it said will allow people without credit cards to shop online and keep within strict budgets.

By Morwenna Kearns