David Prosser: Pre-paid plastic's a rip-off. Just say no

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The Independent Online

Ever tried nailing jelly to the wall? It's an activity that generates exactly the same sense of frustration as exposing the tricks that credit card companies get up to in order to swell their coffers without borrowers noticing. Bring one grubby practice to light, and lenders simply devise another way to make money.

Pre-paid plastic is their latest trick (and they need one now the Competition Commission is to probe mis-selling of payment protection insurance by credit card lenders and others).

These are cards that you load up with cash so that you can use them for spending. They're accepted pretty much anywhere you can use debit and credit cards, as well as for shopping over the phone or on the internet.

Card providers claim the plastic offers all sorts of benefits. For example, there's no chance of going overdrawn (you can only spend as much as you have on the card); there's less risk of fraud; you don't have to stay on top of bill repayments; and you don't even need a bank account.

In the past week alone, two more pre-paid cards have joined the dozen or so bits of similar plastic already launched this year. Quidity, from Paypoint, was launched in a blaze of publicity in a joint initiative with Mirror Group Newspapers, while the wwwcard comes to us from Visa.

Both are being marketed as an excellent way to budget for Christmas, particularly now so many people do their shopping online. Load £20 a week on to the card, and by December you should have a decent amount to spend, they say.

It sounds smashing. Trouble is, pre-paid cards are invariably a rip-off. Quidity cardholders, for example, will have to pay a 3 per cent commission each time they use their plastic, plus £1.50 a time if they use it to withdraw money from a cashpoint.

Other cards are even more expensive. Almost all have a signing-on fee, typically £9 or £10. Many carry a monthly fee as well, plus additional charges each time users restock their plastic with cash. That's before you even spend any of your money, when transaction commissions and cashpoint charges kick in.

To be fair, the wwwcard is less extortionate, with only a £1.40 joining fee and few transaction charges (though see below). But its claim to safeguard internet shoppers against identity fraud seems pretty dubious to me - after all, the plastic can still be stolen and your account can still be hacked into. Anyway, if you really want to save for Christmas, why not hold money in a savings account that will pay you interest?

Pre-paid cards may be huge in the US, but the plastic offered this side of the Atlantic - so far at least - is generally so expensive that its limited value is completely eroded. The cards are certainly no more secure than cash, particularly since most providers do not allow you to reclaim money if you lose your plastic, or if it's stolen.

Oh, by the way, there's a nasty little sting in the tail for anyone using their wwwcard for - how should I put it? - more grown-up spending on the internet. Use the card for online gaming and you'll pay a charge of 3 per cent of the transaction value. The fee rises to 4 per cent for spending on adult sites. Perhaps Visa thinks people will be too embarrassed to complain.

Lloyds TSB is a cheeky so-and-so. It has just been rapped by the Advertising Standards Authority for publishing and distributing a leaflet that purported to be a handwritten note from your next-door neighbour.

The ASA said that the leaflets, with which Lloyds was promoting its home insurance policies, were misleading because it wasn't obvious they were adverts.

So what was the bank's ingenious excuse for this deception? It said it felt justified in using this marketing ploy because it believes itself to be the country's leading seller of home insurance - and is therefore statistically more likely to be insuring your next-door neighbour than any other company.

And they wonder why people don't trust banks.

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