Prepaid cards are often mistakenly called ‘Prepaid Credit Cards’, however this isn’t actually the case – they are not credit cards in the strictest sense.

This is because they do not come with a credit facility from a lender and you therefore don’t go accumulate debt when you spend on a prepaid card.

Credit only becomes available on a prepaid card once you have loaded the money on to it.

With this confusion has come the question of whether or not you receive the same cover that comes with credit cards, specifically protection under Section 75 of the Consumer Credit Act 1974, on prepaid cards. The answer to this is no, you do not get this protection as standard.

Section 75 holds your credit card provider ‘jointly and severally’ liable for purchases between the values of £100 and £30,000 made using your credit card. This means that if there is a problem with the product or service you buy on your card, you can seek a refund from your credit card provider if the original supplier does not meet the contract of purchase and won’t give you your money back, i.e. by failing to deliver the item you ordered or if the company goes bust.

The reasoning behind it is quite simple – you get protection under Section 75 because there is a credit agreement between you and the credit card company. With prepaid cards, there is no such credit agreement.

However, with most rules there are exceptions. The CashPlus Prepaid Card offers consumers the chance to build their credit rating by lending them the sum of the 12 monthly payments required on the card when it is first taken out. The consumer then pays the monthly charge as normal but gets a tick on their credit report each month for using credit sensibly. Because there is a credit agreement in place here, Section 75 applies to purchases made on the card.