Pre-paid credit cards are becoming increasingly popular as Brits attempt to curb their spending in times of tight credit, new research from Virgin Money reveals.
According to the study, UK travellers spend more than £20billion on plastic overseas each year. As consumers become more conscious of the dangers of debt
, the pre-paid credit card
is expected to experience a boom.
The cards, which prevent consumers from spending money obtained through credit as they must be loaded with credit first, typically come with a one-off application fee, which, according to Virgin Money can range from £7.08 up to £19.95.
The study also showed that there are currently around 40 pre-pay cards on the market, but this number is expected to increase in the next few months as other lenders capitalise on the new market.
Because interest cannot be charged as with a traditional credit card, around 40 per cent of pre-pay cards on the market charge a monthly fee ranging from £1 to £5.95. And, although a pre-paid credit card
can stop people spending money they cannot afford, they are not immune to overseas usage charges.
Consequently, Virgin Money is reminding holidaymakers to budget for additional overseas charges as part of their summer holiday to avoid being caught out on their pre-pay credit cards.
Virgin Money spokesperson, Grant Bather, said: "Everyone needs to keep their spending under control as the credit crunch and soaring inflation take a big bite out of household budgets.
"Pre-paid cards remove the temptation to run up debt while you're on holiday as you can only spend the amount that is loaded on your card. They're a good discipline to get into to avoid the risk of the sun going to your head and burning up your bank balance on holiday," he added.
© Fair Investment