Prepaid cards look like credit and debit cards with a card number, magnetic strip and chip and offer the same ability to purchase products and services. Importantly though as they are not linked to a bank account or credit facility you can only spend the cash balance that has been preloaded onto the card. We now take a closer look at what prepaid cards are in this article.

It is easy to load a prepaid card with cash, however it cannot be used to buy anything with the card if money has not been loaded onto it. So a zero balance means that you cannot spend and therefore cannot run up debts as you can with a conventional credit card. There is no chance of building up that on-going balance that becomes increasingly difficult to repay as the months go by.

This means that prepaid cards work rather like pay as you go mobile phones. You can only use the minutes or texts that you've bought with a PAYG phone card and the same applies to a prepaid card. Once the uploaded money has been spent, that's it - it is useless until you load more cash onto the card.

The advantage of using a prepaid card is that you are not borrowing money on credit and therefore there are no credit checks involved with the application process. This means that people whose credit histories are impaired in some way will not be rejected as they are likely to be when applying for a conventional credit card. Prepaid cards therefore offer an increasingly popular method of handling money without being subject to the tightening of lending criteria by banks after the credit crunch.

You can buy and load the cards at a variety of outlets, including high street banks and the Post Office as well as other retail outlets and non-traditional financial institutions. For example O2, the mobile provider, has moved into this market with its popular O2 Money prepaid Visa cards, Cash Manager and Load & Go, both fee free when used in the UK.

You can preload most cards at ATMs, over the Internet, via text messaging or by phoning your provider. Generally prepaid cards are issued under the Visa, MasterCard, Visa Electron or Maestro brand, established and widely accepted brands.