The Tricky Prospect of Pre-Paid Credit Cards

The issue of charges for booking cheap flights online via credit or debit cards has long been a vexing question, and one which a few moments’ consideration causes many holidaymakers to start fulminating against the budget airlines.

Legally, all commercial enterprises which accept card payments are permitted to levy a charge, provided that the charge is “proportionate” and that there is an available option where no charges apply.

Naturally, this stipulation leaves a great deal of scope for companies to manouevre. Perhaps the most widely publicised example is the wily Ryanair, which urges customers to use the pre-paid MasterCard to avoid extra charges. This has drawn criticism that the card is somewhat obscure – just 5 per cent of the population hold a pre-paid card, much less a pre-paid MasterCard – criticism that will not be mitigated by the news recently that Ryanair has launched its own-branded MasterCard, which from October will be the only way to avoid the extra charges.

MoneySavingExpert.com’s Martin Lewis fumed: “This is anti-competitive, it’s an insult to loyal passengers who first got Electron cards so they could pay for free, then were forced to switch to prepaid Mastercards and are now being asked to dance again this time by getting Ryanair’s own prepaid card.”

Ryanair claims that its admin fees are used to maintain its websites. Even with these charges, it is usually the carrier offering the cheapest flights. However, there is now an additional worry for those opting for a pre-pay card.

This week the Financial Services Compensation Scheme (FSCS), warned that customers are not covered by the FSCS – and that many cardholders are unaware of the fact.

FSCS chief executive Mark Neale told The Times newspaper: “This means that if the provider goes bust then cardholders will lose all of the money on their card and will not be eligible for protection.”

So, while it is a useful way of avoiding any admin fees, it’s worth a little careful consideration before you invest in pre-paid credit cards.