Prepaid cards are becoming popular in the UAE as it gives an individual the flexibility to spend without the risk of monthly penalties and repayments or fees. A prepaid card will not let you spend money that you don’t have. You can avoid getting in debt and useful to budget your expenses and reduce your expenses.
What is a prepaid card?
Prepaid card is a payment card which is loaded with money. You can load the money or someone else can load it for you. The card looks like a normal debit or credit card. It has a card number, signature strip and company branding. The card is not a credit card which offers you a line of credit.
You can load a prepaid card with dirhams. The prepaid card is spending with your own money and not from funds that you borrow from the lender. If you try to spend more than the money you have in your card, the transaction gets rejected.
Features of a prepaid card
The features of a prepaid card are as follows:
- Consumer can enjoy the convenience of plastic money without fear of getting in a huge debt.
- Customer can book air tickets and movie tickets, can purchase groceries and make other online payments.
- There is no lengthy procedure to avail a prepaid card.
- The card can be obtained over the counter and can be used immediately.
- The cards are tailor made to meet the demands of the customers.
- This card is for those who want to avoid using cash and also stay out of debt.
- You have a reload option. You can add money to your prepaid card through various ways like direct deposits, loading cash at the participating retailers and depositing at ATMs. Online transfers are also allowed.
- You get ATM access to the cash on the card.
- There is a monthly fee charged which is usually waived if you make direct deposits. Some cards will charge a fee for every purchase made and for making ATM transactions.
- There is a limit on how much you can reload and withdraw during a given period.
- The cards don’t have fraud protection. Some providers offer purchase protection.
- There is expiry date for the card. You must check if the provider will reissue a card after the expiry. Most times there will be cash on the card and the provider wouldn’t have reissued the card with the balance available.
- Some cards offer rewards for purchases made using the card.
Advantages and disadvantages of a prepaid card
The advantages of a prepaid card are as follows:
- You are spending your own money and hence you can save yourself from falling into debt.
- Prepaid cards are issued immediately.
- The card is accepted globally as they use Visa or MasterCard.
- There is no credit check required to get the card.
- There is no credit facility so you cannot get into debt.
- You are in control of your spending.
- The card can be used abroad and is ideal when you are travelling.
- This card is suitable for teenagers and students.
- This account is an alternative to traditional bank account.
- Lot of prepaid cards offer cashback benefits for purchases made using the card or for online purchases.
The disadvantages of prepaid card are as follows:
- Most cards charge a fee. Setting up fee, fee for loading money, monthly administration fee, cash withdrawals, redeeming funds, inactivity, etc. will be charged. You need to read through the terms and conditions and get a clear understanding of the fees before you take a prepaid card.
- Your transactions will be rejected if you don’t have sufficient funds.
- The card is not a debit card as it is not linked to your bank account.
- You don’t earn any interest on the money you have in your card.
- You have to wait in queue to load your money on your card and it can be frustrating.
- The benefits you earn on your prepaid card is not as lucrative as the rewards you earn on your credit cards.
- Your spending is capped to the funds available on the card.
- The card comes with an expiration date.
- The card is not suitable to make expensive purchases.
- On expiry it is difficult to retrieve the unspent money on your card.
- No fraud protection provided.
Prepaid cards vs Credit cards
|Prepaid card||Credit card|
|You are using the funds available on your card.||You are borrowing money from the bank or financial institution.|
|You don’t have to pay any interest for the amount used.||You need to pay interest on the amount you borrowed.|
|No credit checks are made to provide the card.||Credit checks are made and based on the credit score the credit limit and the interest rates are set.|
|No line of credit.||Line of credit can be changed.|
|Fees charged based on the type of card.||Late payment fee, over the limit fee, cash advance fee, statement fees, etc. are charged.|
|Basic customer information is required.||Full customer information is required.|
|Can be used anywhere.||Can be used anywhere.|
|Some cards can be used in ATMs.||Can be used in ATMs.|
|No fraud protection only purchase protection offered by some providers.||Fraud and purchase protection is provided.|
How to get a prepaid card in the UAE
To avail a prepaid card in the UAE you need to meet the following eligibility criteria:
- You have to be at least 21 years old.
- There is no salary requirement applicable.
- People not having bank accounts can also get a prepaid card.
- Ideal for teenagers and students.
Banks offering prepaid cards in the UAE
Following are the various banks offering prepaid cards in the UAE:
- Majid Al Futtaim Finance
- Emirates Islamic Bank
- What are prepaid cards?
Prepaid card is a payment card which is loaded with money.
- Is there any interest charged on your prepaid card?
- Can I make a transaction for AED100 if I have only AED99 in my prepaid card?
No, you will not be allowed to make a transaction for AED100 if you have only AED99 on your card.
- What can I use my prepaid card for?
You can book air tickets and movie tickets, can purchase groceries and make other online payments with your prepaid card.
- Will I be required to open an account to get a prepaid card?
No, you will not be required to open an account, you can just top up the money in your prepaid card via direct deposits, loading cash at the participating retailers, depositing at ATMs, and online transfers.
No, there is no interest charged on the card as you are not taking credit.