Using your own money
Prepaid cards allow you to load money on the card and then use
those funds wherever the card is accepted. Prepaid cards have
important limitations which you should keep in mind when using
How prepaid cards work
Prepaid cards need to be 'loaded' with money before you can make
purchases. The amount of money you can use or withdraw generally is
limited to how much you have available on the card.
Some prepaid cards are also known as 'reloadable cards', which
allow the cardholders to 'top up' the amount of value available on
the card. Many prepaid cards can be used at a variety of locations.
Some can be used with any retailer that takes credit or debit
They are available from financial institutions, retailers,
foreign exchange merchants and post offices.
Why get a prepaid card?
There are various reasons why you might get a prepaid card.
To control spending
Prepaid cards are used by people who want to control their
spending and don't like carrying too much cash. They allow them to
have a card to make purchases but their spending is limited to the
amount available on the card.
For young people
Prepaid cards are sometimes bought for young people by their
parents to restrict their spending to the card's loaded amount and
monitor spending on the card. If the card is lost or stolen parents
can call the card issuer to get the account blocked. In most cases,
they can have the outstanding balance transferred to a new
Prepaid cards are bought by people who are travelling overseas
and don't want to carry cash with them. These are often called
travel cards. They can load the card with the currency they need at
a locked-in exchange rate and can usually use it to make purchases
online, in stores and to withdraw money at ATMs. Some cards allow
only a single currency to be loaded while others allow for multiple
currencies. Make sure the card you choose caters for the currencies
Some airlines offer prepaid travel money cards so the money you
spend on these cards can earn you reward points. Find out more
For online purchases
People who shop online sometimes get a prepaid card to separate
their online spending from their usual spending and to protect
fraud. If someone steals their prepaid card details they would
not get direct access to their bank account or credit card
As a gift
Some people buy a prepaid card as a gift. Unlike gift vouchers
they can often be used where credit cards are accepted and are not
limited to particular retailers.
Things to watch out for
With prepaid cards watch out for shortage fees if you have a
negative balance. Withdrawing funds as soon as the card is no
longer needed is one way to avoid paying extra fees.
Fees vary with different prepaid card providers but they are
usually higher than you would pay at most banks or credit unions
for a standard debit card tied to a bank account.
You should compare these fees to other options like paying with
cash or lay-by before you buy a prepaid card. Check the fees listed
on the terms and conditions of the card.
Here are some fees to look out for:
- Fees for loading funds on the card
- Fees for withdrawing money at an ATM
- Currency conversion or overseas transaction fees when you use
the card to buy goods overseas. (You should compare these to the
foreign currency exchange rates offered by other currency
- Fees for not using the card for a certain period of time
- A fee for having a negative balance
- Some merchants may add a surcharge to purchases made with a
Ban on excessive surcharge fees
From 1 September 2016 large businesses will be banned from
charging excessive payment surcharge fees on
debit, credit and prepaid card transactions. This
means a business cannot charge a customer more than what it
actually costs them to process a payment. These rules will apply
to other businesses from 1 September 2017.
For more information see credit, debt and prepaid card surcharges
on the ACCC's website.
Most prepaid cards have an expiry date. Card issuers differ in
how they treat funds left on cards after the card expires depending
on their terms and conditions.
When your prepaid card expires the card issuer could:
- Give you a new prepaid card with the outstanding balance, minus
- Have the funds transferred to an account nominated by you
- Charge you a monthly fee until the funds are withdrawn or used
For amounts over $500, after 3 years the funds could become unclaimed
If you think you might have funds left on an expired prepaid card
you should contact the issuer to find out if and how you can access
It is important to read the terms and conditions for your card to
know what will happen to your funds both before and after the card
expires. The expiry date of the card should be on the card
Prepaid card funds are not guaranteed
Funds on prepaid cards provided by authorised deposit taking
institutions (ADIs) are generally not guaranteed by the Australian
Government if anything happens to the ADI. Find out more about the
Reloading time lag
If you are reloading your prepaid card, be aware that reloadable
amounts can sometimes take a few days to register on the card,
especially when you are loading them overseas. You may need to
think ahead to ensure the card has the funds on it that you need in
time for your purchase.
Prepaid cards are a great way to spend the
money you have rather than getting into debt on your credit card,
but check the fees to make sure they are a cost effective option
Last updated: 31 Aug 2016