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Prepaid cards becoming viable alternative credit option in UK

Feb 26, 2013 Sean Albert

Prepaid debit and credit cards are rapidly gaining popularity, albeit to serve a wide variety of purposes.

For example, many underbanked citizens are increasingly leaning on alternative credit methods. Because many of these lenders use Payment Reporting Builds Credit scoring measures, they have made funding more accessible to people with poor consumer credit reports.

At the same time, some companies have also found alternative credit, like prepaid cards, to be extremely useful.

"While the main motive behind introducing prepaid cards was to enhance the service user's ability to deal with direct payments, by reducing the bureaucracy for service users when filing returns and dealing with there council, there are financial benefits to the council too," Elizabeth Jones, assistant director of finance at Brent LBC, recently told LocalGov.

Jones said her organization has been able to recover approximately 6 percent of its yearly direct payment expenditure, largely because of alternative credit, which has allowed the company to eliminate its six-month backlog of monitored returns.

Identifying sensible prepaid cards
Although the need for credit cards hasn't declined, many consumers are finding them extremely difficult to secure in the post-recession world. This is where prepaid cards have filled an important gap for shoppers.

In a recent blog post for Money Talk News, Logan Abbott, editor of MyRatePlan.com's credit card section, discussed many of the advantages of these cards, such as money availability. Paychecks often include wait times before they are available in a consumer's checking account. With prepaid cards, on the other hand, people usually have the option of spending those funds immediately.

Sometimes, prepaid debit and credit cards include monthly and transaction fees. However, as Abbott noted, all consumers need to do is carefully review the conditions and they will be able to enjoy the full benefits of alternative credit methods.