What is a cash card?

Payment cards are more important than ever in an increasingly cashless society. With so many options on the market, choosing the right card (or cards) for you can be daunting. On this page, we explore cash cards in the UK, the ‘cash card vs debit card’ debate and highlight the main difference between debit and cash card options.

In the UK, the term ‘cash card’ generally refers to a prepaid card onto which funds are loaded from another source (such as a bank or building society account).

Prepaid cards work like pay-as-you-go phone plans. Funds are loaded onto the card, either via a website or app providing access to a cash card account, or by purchasing a prepaid card in a shop. The holder can then use these funds to purchase items and pay for services (with some exceptions). Although prepaid cards aren’t linked to a current account, you can still receive wages and benefit payments onto them in some cases (it varies depending on how each provider handles your cash card account).

Here are some common features of cash cards in the UK:

• Most can be used at a cash machine… but not all. If you plan to withdraw cash, check the terms of your card before you sign up or add funds.
• Most can be used for online transactions. Again, this can vary from provider-to-provider, so it’s worth checking before committing to a prepaid card.
• You can only spend the funds you’ve loaded onto the cash card. Prepaid cards don’t include overdrafts, so you can only spend what you have available.
• Prepaid cash cards don’t require a credit check. As such, they’re a popular choice for people with poor credit scores. Payments made using a prepaid card won’t affect your credit score, however, even if you spend responsibly.
• You might be able to add your prepaid cash card to a digital wallet… but, as with other online payments, it’s not guaranteed, so check the terms closely.
• They can’t be used for transactions requiring a deposit or pre-authorisation. This includes some hotel bookings, car rentals and pay-at-pump petrol refills.
• Funds held on a prepaid card aren’t directly protected by the FSCS. Prepaid card providers are required to ringfence customer funds with a bank, however, so you may be able to claim back your funds in the event of your provider going bust. You’ll have less protection if the bank or building society holding your ringfenced funds goes out of business, though. As a result, it’s advised you don’t store a large amount of funds on a prepaid card.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

Debit cards are generally issued with a current account. As such, they typically require a credit check to acquire. Many bank accounts include an overdraft facility.

Debit cards are more common than prepaid cash cards in the UK, as paying directly from a bank account is more practical and faster than transferring funds to a separate card from another provider.

Someone may choose a cash card over a debit card if they can’t open a bank account due to a poor credit score, or want to keep a tighter reign on their spending. Prepaid cash cards can be useful for one-off trips and events too, particularly if you want to stick to a set budget.

Most prepaid cash cards charge fees, but the level of fees and when they are charged depends on the provider. The most common fees include:

• Application fees for taking out a new card
• Top-up fees: These generally apply to top-ups below a certain threshold, i.e. £1 if you top up less than £10, or if you exceed a set number of top-ups per month.
• Monthly fees: not all providers charge, but some may take a monthly fee.
• Renewal and replacement fees: The provider may charge for a new card after loss or expiry.
• Cash machine withdrawal fees: You may get charged between £1 - £3 for withdrawing cash from an ATM.
• Transaction fees: You may be charged a fee per transaction, either a % of the total transaction or a set fee.
• Inactivity fees: You may incur a fee if you don’t use your card for a prolonged period of time.
• Fees to move unspent money to another account: You may be charged for withdrawing your funds to a different bank account.

As fees differ from provider to provider, it’s important to always do your research before using a prepaid cash card.

Yes, most cash cards allow you to withdraw funds from a cash machine.

The majority of prepaid cards also allow you to withdraw funds and transfer your money to another bank account, although it will likely incur a fee. Therefore, to avoid losing money, it may be worth spending the funds left on your cash card account rather than transferring to a separate account.

Prepaid cash cards are sometimes used as an alternative to traditional expense processes. Here are a few reasons businesses may consider using prepaid expense cards:

• Employee expenditure can be controlled more closely and reduce the risk of overspending.
• You don’t have to reimburse employees, reducing admin hours and reliance on self-reported expenses.
• Prepaid cards bypass credit checks, which may make them faster to acquire than a standard credit card.
• Some prepaid cards link directly with accounting software for reporting purposes.
• Some cards allow businesses to load funds in a chosen foreign currency, which negates foreign transaction fees and loss via exchange rate fluctuations.

There are drawbacks, however:

• Prepaid business cash cards lack flexibility if an employee requires funds quickly, especially outside business hours.
• Many providers charge fees for admin, transactions and withdrawals, potentially leading to higher total expenses.

Some parents find cash cards a useful alternative to traditional debit cards, as they allow for greater control of spending without the restrictions of cash (especially in an increasingly online world).

If you’re considering giving your child a cash card, it’s generally a good idea to check if there are any associated fees or any restrictions on transactions (i.e. online purchases).

In the UK, you can open a bank account for a child from 11 years old. Almost all child accounts will have a cash card as standard; cash cards associated with bank accounts are similar to prepaid cards, but funds come from an account rather than being loaded directly to the card. Some accounts include an app to help parents manage funds and restrict spending. Apps can give children a degree of responsibility over their finances too, which may help to develop a more positive and responsible relationship with money. Children can open their own account from the age of 16, although overdrafts and other credit facilities are only available from 18 years old.

If you want to start growing your money, opening a high-interest savings account could help. The Raisin UK marketplace gives you access to a range of competitive savings accounts, including easy access savings accounts and fixed rate bonds. To start your saving journey, open a free Raisin UK account, apply for your chosen account and transfer your deposit.