According to research, there are over 1.5 million people in the United Kingdom who do not have a bank account – which is an incredibly shocking statistic when you think about it. PDNET brings you advice on using a prepaid card.
That enormous figure of 1.5 million people makes up a significant proportion of the population. It’s also worth bearing in mind that the vast majority of people without a regular account lie amongst the poorest people in the country. Which, of course, means that they are the people most likely to struggle to borrow money from more traditional sources like banks. So, when it comes to borrowing something like a payday loan, where do people without bank accounts turn?
As a rule, when you ask a payday UK company to lend you money, they need you to fill out an application before deciding whether to approve the loan. Then, they will pay it into your bank account. You then repay them over time. But what if you don’t have a bank account? The majority of payday loan companies will not lend you money if you don’t have one, which means that a percentage of the population need to find other ways of borrowing. Sometimes, this will involve turning to the doorstep – or home visit – loans, which you are better off avoiding. Many people are starting to ask if it is possible to get a payday loan paid into a prepaid card. The big question is, does such a thing exist? And should you use it? Let’s take a closer look at everything you need to know.
What is my prepaid card status?
Prepaid cards are something of a new arrival to the financial services field. Some people are struggling financially and don’t have a good credit rating, so can’t get a credit card. The way these prepaid cards work is relatively straightforward. You pay money onto the card and use it exactly as you would a standard debit or credit card. The only difference is that you are spending your money; not spending credit; and you need to top it up as and when you need to use it. Many people without bank accounts use these prepaid cards as they can make card-only payments – such as shopping online, for example. And, in principle, they work well and provide a service. However, it’s important to understand that prepaid cards are not free, and you have to pay the issuing company to use them.
Can you put a payday loan on a prepaid card? The short answer to this question is that no, you can’t put a payday loan on a prepaid card at the moment in the United Kingdom. At least, you can’t if you approach a company signed up to the Financial Conduct Authority – also known as the FCA. However, such services indeed exist in the United States of America, where regulations and codes of conduct are a little looser than they are over here. Across the pond, some payday loan companies will transfer cash payments to a prepaid card quite happily. The terms of the loan vary from state to state, and people are allowed to borrow any amount from around fifty dollars or so up to four-figure sums, depending on the individual’s circumstances. Turnaround is typically a couple of days, and the costs involved also vary per state.
Can I take out a loan on my prepaid card with no fees?
Some companies that provide their customers with prepaid cards can also put loans on their card. The difference between here and the States is that in the UK, the FCA sets guidelines for giving loans. Loan companies test teh consumer for suitability for the loan via credit checks and all the other standard controls. If you do intend to use one of these loans, it’s important to understand that interest rates can be enormous, and you must be in a position to pay it back quickly if you don’t want to end up in a lot of debt.
Of course, the FCA do not cover all lenders – only those that want to be responsible lenders and who want to comply with the nation’s lending laws. Sadly, there are organisations out there that will try and make as much money as they can – illegally – by avoiding FCA authorisation. For consumers, it’s important to understand that people who go down this route are acting outside of the law. If caught, they can face severe fines and even imprisonment – so it is a serious matter. Ultimately, if a supposed business offers you a payday loan straight onto your prepaid card, unless they are the card holders, they are not acting lawfully. Ultimately, you should run a mile – or two – before contacting the FCA as soon as you possibly can.
What are the dangers of using prepaid cards visa rather than an FCA-authorised lender?
As you can imagine, there are many dangers of borrowing money from anyone or any business that is working outside of the law. Sadly, there are many unregulated lenders out there, ripping people off left, right, and centre. They are thought by many to be scourges of society – and for a good reason. They lend money illegally, often for extortionate interest rates, and take illegal action to recover their money – along with the huge interest payments.
If you have ever heard the term ‘loan shark,’ it’s precisely these types of people that we are discussing. There have been plenty of terrible stories about loan sharks over the years – they used to be all the rage in the past, but even today there are plenty of them. And if you fall into debt with these kinds of people, there are plenty of dangers involved.
A story from earlier this year revealed how one loan shark took control of people’s houses after they failed to repay him. It’s a shocking tale, yet only one example of how these ‘businesses’ operate, and there is another crucial thing to understand about this particular case. But, astonishingly, it is only the first time the FCA has taken criminal action against an individual over consumer lending. And, given that the man in question lent over £1 million over a four-year period, it’s no surprise to hear that plenty of illegal lenders are quite happy to push the boundaries without fear of any comeback.
Prepaid card visa and loan sharks
For you as a consumer, it is vital that you never borrow money off an illegal loan shark. A typical loan shark who is not acting according to the law, will, quite literally, do anything to get back what they believe you owe them. Threatening behaviour is par for the course, and violence is not uncommon. You can also expect to see the sight if stocky, well-built men, turning up at your door and demanding you let them in. It should be of no surprise that loan sharks also have a habit of taking your possessions – illegally, of course – if you can’t pay.
Conclusion: Prepaid card UK
Finally, it’s important to understand that some people feel like they have nowhere else to turn other than a loan shark. If you are ever in this position, it is vital that you resist the impulse, no matter difficult things might be for you financially. If they are difficult today and you do decide to apply for short term loans from a source not authorised by the FCA, you can expect a thousand times the trouble in the foreseeable future.