6 questions to ask when comparing prepaid gift cards

By UK CreditCards.com

Many shopped-out consumers are opting for prepaid gift cards instead of traditional gifts. Prepaid cards allow recipients the luxury of spending money on themselves and choosing what they really want.

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However, these types of cards can also come loaded with fees, so it's important to be careful when shopping around. Here are six questions you should ask when comparing prepaid gift cards.

1. Does it come with a monthly fee?
Some prepaid cards have a monthly fee in exchange for reduced fees elsewhere. Cards with monthly fees are primarily intended for those who plan to use the card as an everyday payment method.

However,  if you are offering the card as a gift, you might want to skip this type of card. Imposing an unexpected fee on your giftee may be less than welcome.

Prepaid cards currently on the market that feature monthly fees include MasterCard's Card One Banking prepaid card and Visa's Virgin Money Monthly card.

2. What's the set-up fee?
Prepaid cards are generally free to obtain, but there are a few that incur a set-up or purchase cost. Set-up fees tend to be low, ranging between £5 to £10 per card. However, if you are buying multiple prepaid gift cards, you might want to avoid these types of cards or opt for cards at the lower end of the price range.

Prepaid cards without set-up fees are available, but they can be hard to find. Prepaid gift cards with lower initial set up fees include the Orange Cash card, the CashPlus Prepaid card and the Kalixa card.

3. How old is the person receiving the card?
Many prepaid cards are only only available to those over the age of 18. However, there are some cards on the market that are designed specifically for under-18s. Prepaid cards for the under-18 set include the Splash Plastic card, the Neon card and the Virgin Money card.

Another option if the recipient is very young is to buy the card for the parent to use on the child's behalf.

4. What is the expiration date?
Prepaid gift cards usually don't last forever. Most will have a long-term expiry date of three years or so. Others will expire if they are not used or reloaded within a certain period of time.

When comparing prepaid cards, check the expiration date, particularly if you are buying well in advance. If the card does have a future expiration date, make sure you inform the recipient to ensure that they don't lose their funds.

5. What are the reload fees?
Once the recipient has spent the preloaded funds on the prepaid card, they can use the card as an everyday card if they wish.

The card can be reloaded and used over and over again. However, most prepaid card issuers do apply a fee for reloading the card, especially if you load by credit card or at a PayPoint station.

The reload fee can sometimes be avoided by using particular payment methods, such as Bacs, or having funds directly loaded with your wages. If the card does incur fees, let the gift recipient know.

6. How much does it cost to withdraw cash?
Whether your recipient is using their Christmas prepaid card with the funds you loaded or funds they have loaded themselves, it is important to remember that users should avoid withdrawing cash from an ATM wherever possible. Card issuers usually apply a cash withdrawal fee that can range anywhere between £0.75 to £3.00 or 1.5%-3% of the value of the withdrawal.

Remind the recipient that whilst they can withdraw cash using the card, they will get much better value for the money if they stick to purchases.

The bottom line: Prepaid gift cards are an excellent gift choice if you are stuck for time or looking for something a little more personal than cash. They are easy to use and can be used over and over again. However, don't forget to compare cards before purchasing one -- you don't want to accidentally buy one that is not appropriate to use as a gift card or that's more expensive than it's worth. 

See related: Will prepaid cards replace cash and cheques?; Editor's Choice: The best prepaid cards for travel

Published: 1 December 2011