Prepaid cards are slowing making their way into people’s lives across the world. These look like regular debit or credit cards but are functionally different from either of them.
Features of Prepaid Cards in UAE
As the name suggests, a prepaid card is a card issued by a bank or a financial institution which is preloaded with funds. This is a payment card and can be used like any debit or credit card. However, unlike a credit card, it doesn’t offer you credit and it is not directly linked to your banking accounts either [which is the case with debit cards]. Prepaid cards can be loaded with money by you or a third party and can be used up to the amount available. In short, when you use a prepaid card, there is no loan involved. You are spending the money that is already deposited with the bank or financial institution that has issued the card to you.
Let’s look at some of the basic features of a prepaid card:
- No credit approval required to avail prepaid card.
- Almost immediate issuance of the card.
- It can be used everywhere a credit or debit card is being used.
- A cashless and debt-free option to transact.
- Funds can be reloaded online, through direct deposits and ATMs.
- ATM withdrawal option available.
- Some banks might charge a small fee to provide the service.
- Usually, there is a limit on the amount that can be loaded and withdrawn in a specific period.
- These cards have an expiry date too.
- Some banks offer loyalty points or rewards for transaction done using a prepaid card.
- They can be used as gift cards
- Can be used as travel cards when you travel abroad.
The only criteria to avail a prepaid card in UAE is that the applicant must be over 21 years of age. You don’t need any documents or even an account with the bank issuing the prepaid card. However, this must be checked with the individual bank or financial institution before approaching them for a card.
Here is a quick look at the pros and cons of a prepaid card:
Pros of Prepaid Cards:
- Global acceptance being powered by VISA or MasterCard
- No credit scrutiny
- It’s not a loan hence no debt-worries
- Immediate issuance
- Possibility of earning reward points or a cash back
Cons of Prepaid Cards:
- Not linked to your account so purchase can be made only to the extent of the amount loaded
- Fees can be charged by the issuing institution for various services
- No interest on the money lying in the card’s account
- Transaction will be outright rejected if the it exceeds the amount available on the card
To bring things into perspective let’s draw a comparison between prepaid and credit cards:
|Interest to be paid
|Credit history scrutiny
||Usually ATM, POS and online
||ATM, POS and online