Prepaid card

You can think of a prepaid card as a wallet you can 'load' with coins and banknotes. Here's how it works, what costs it may involve, and what risks to be aware of.

What is a prepaid card?

A prepaid card is a payment card onto which you load money to be used later - hence the term 'prepaid'. You can think of it as a wallet: you top it up by transferring a sum of money to the institution that issued the card, and then each purchase you make reduces the amount available. For example, if you load €100 and buy a jumper for €20, you'll have €80 left. When there are insufficient funds on the card, you'll need to top it up again.

You can use a prepaid card for payments in shops and online, as well as to withdraw cash from ATMs. If it's linked to an international payment circuit, you can use it abroad too.

Some prepaid cards also come with an IBAN - the code used to identify bank accounts. These are often referred to as 'account cards' or 'IBAN cards', and can be used to:

• make and receive credit transfers;
• receive salary or pension payments;
• set up automatic bill payments;
• receive SEPA Direct Debits.

There are two common variants of prepaid cards designed for specific uses. The first is single-use cards, which can only be used once; the second is restricted-use cards, which are limited in terms of where and how they can be used (for example, they may only work in shops operated by the issuer, within a defined retail network, or for particular goods and services - such as fuel cards).

Because these cards are intended for limited purchases, they can sometimes be issued by firms that are not subject to financial supervision.

Funds held on prepaid cards - except for single-use or restricted-use ones - are classed as electronic money.

How to obtain a prepaid card

You can request a prepaid card from a bank, Poste Italiane, or an Electronic Money Institution (EMI). You don't need a current account to get one. To load the card, you pay money to the issuing institution. In some cases, another person can load funds onto your card. However, note that some cards are non-reloadable..

Costs associated with prepaid cards

How much does a prepaid card cost? Main charges may include:

• an annual fee;
• an issuance fee;
• ATM withdrawal and reloading fees;
• currency conversion costs for payments or withdrawals in currencies other than the euro.

Prepaid cards with IBANs are generally cheaper to maintain than traditional current accounts. Many banks issue them free of charge. They are usually exempt from the government stamp duty charged on standard current accounts. In some cases, you may also be exempt from the monthly fee if your salary or pension is paid directly onto the card.

Risks

Prepaid cards, like all payment cards, come with certain risks. They can be lost, stolen, or cloned (where the card's data is copied and used fraudulently). They may also make it easier to overspend.

To reduce the risk of loss, theft, or cloning:

• never leave your card unattended;
• don't keep your PIN written down near the card;
• activate real-time notifications for payments and withdrawals;
• regularly monitor your transactions;
• if you see unfamiliar transactions, report them immediately and block the card - most issuers provide a freephone number for this.
• in case of theft, block the card and report the incident to the police or Carabinieri straight away.

If your card is lost or stolen, the maximum loss you can incur is the balance loaded on the card.

You can also ask your bank to correct unauthorised or incorrect transactions and request reimbursement for any improper charges.

When shopping online with your prepaid card, always make sure the website is secure. Most browsers display a padlock icon next to the URL, and the web address should begin with 'https'. However, be aware that fraudsters can sometimes mimic these features on fake websites.

Finally, when paying in shops, always double-check the amount printed on the receipt before confirming the payment - it should match the price you were told.