Large balance on prepaid- not protected

winnie101

'I understand that if I choose to hold a large balance on my Prepaid Card (such as £1000 or more) I accept the risks of holding this money on my card. I understand that I may lose my money if Newcastle Building Society becomes insolvent and that the Financial Services Compensation Scheme does not apply to my Prepaid Card.'

Hi!

I was applying for a mytravel cash prepaid card and was asked to tick the above statement.

I am confused now because I thought a prepaid card was one of the recommended ways for foreign currency.

Are all prepaid cards not protected? I know it would be unlikely that a bank would become insolvent but you just never know in the current climate.

Thanks

liam8282

If you don't want to put all your eggs in one basket, take out 10 prepaid cards with different banks maybe?

Baldur

winnie101 wrote: »

Are all prepaid cards not protected?

Of course they aren't, they are not deposits which come under the provisions of the Financial Services Compensation Scheme - they are merely convenient ways of accessing your funds at home or abroad.

Bob_the_Saver

Transfer it on-line then take it out instead of holding a large balance for any length of time.

ferf1223

winnie101 wrote: »

I am confused now because I thought a prepaid card was one of the recommended ways for foreign currency.

Are all prepaid cards not protected? I know it would be unlikely that a bank would become insolvent but you just never know in the current climate.

Thanks

http://www.moneysavingexpert.com/travel/cheap-travel-money#prepaid
What happens if the Prepaid card company goes bust?

All prepaid cards listed are backed by a bank or building society. If the prepaid card company goes bust then the bank or building society that issues the cards will be liable for your cash.


However if the bank or building Society who provides the card goes bust your cash is NOT protected. While with some institutions the money can be ring fenced in separate accounts (though it may be with the bank themselves) there is always a very minor risk as the money is not counted as a deposit thus not covered by the Financial Services Compensation Scheme.


So as a precaution do consider it only a card to have enough cash on for immediate spending requirements rather than as a place to store your cash.

Doshwaster

Bob_the_Saver wrote: »

Transfer it on-line then take it out instead of holding a large balance for any length of time.

I wouldn't leave a large amount of money on one of these cards for a long time anyway. They don't pay interest and you stand a 50/50 chance of losing money on interest rate fluctuations (then again, you might gain)

StuieUK34

I have over £2k on my FairFX dollar card, which is issued by NBS (who do most prepaid cards).
If by chance somthing went wrong (between now and July!), i would expect all my money back
Why ?
Cos when the other banks and building societys went tits up, the government bailed them out with taxpayer money..... so if NBS goes belly up, i expect them to get the same treatment

ferf1223

StuieUK34 wrote: »

I have over £2k on my FairFX dollar card, which is issued by NBS (who do most prepaid cards).
If by chance somthing went wrong (between now and July!), i would expect all my money back
Why ?
Cos when the other banks and building societys went tits up, the government bailed them out with taxpayer money..... so if NBS goes belly up, i expect them to get the same treatment

I'm not sure if pre-paid card balances would be included in a bail-out or not...but more importantly, some people couldn't afford to re-fund their holiday money while waiting for any bail-out to come.

We have a FairFX card too (two, in fact, so if something happened to one, we could transfer the balance to the other) but don't really bother with them anymore - we ran the balance down on them last trip...after narrowly avoiding the CCE collapse by 4 days, we've become a bit more cautious with our holiday funds.