What are Prepaid Cards and how are they used?

A full guide to the use of prepaid cards, which details how prepaid cards work, what they can be used for and is peppered with real life case studies, can be downloaded from the Guidance section

Prepaid cards are most often used to solve the problems generally associated with making direct payments to service users and patients, namely;

  • transferring funds
  • monitoring and auditing that the funds are being spent that in accordance with the agreed plan
  • reclaiming unspent funds and managing fraud

They enable good care and effective monitoring to be carefully balanced

Funds can be uploaded to the card by the funding organisation(s) and/or service user and then spent in a similar way to a credit or debit cards until the funds are exhausted. The cards cannot become overdrawn as there is no credit element associated with the cards.

If necessary carers can have companion cards which allow access to a single pot of funding

Most importantly, prepaid cards now have a sort code and account number associated with them that enables the cards to be used as a ‘bank account lite’ and payments made from the card by direct debit or standing order. This means that anyone who has a bank account themselves can be paid, they don’t have to accept card payments. Recent figures show 70% of payments from prepaid cards are made in this way

Service users can monitor and manage their funds through an online portal or, if they don’t have the capacity or capability to do that, via a telephone banking facility provided by the supplier

Funds can be uploaded to the cards in an instant, 24/7, to deal with emergencies and card use can be blocked as soon as a problem is recognised. The funding body has total control over their use (unlike the funds being paid into a separate bank account)


The benefits to the funding body are clear

If allowed by legislation the transactions can be viewed and monitored through a portal in real time, there’s no chasing bank statements and then looking for a needle in a haystack. This makes monitoring much easier and more effective, from a safeguarding point of view as well as risk management. Suppliers also send an email every morning which highlights where certain limits (e.g. card balance exceeds 60 days of funds) have been breached to alert monitoring officers and help focus their attention.

Spend can be more easily monitored against a care plan which improves the effectiveness of the plan itself and leads to better outcomes for the service user or patient

Of course, an audit trail is automatically created and this reduces corporate risk and liability as well as helping to handle the local market management requirements of the Care Act.

Claw back of fund becomes much easier as both the cards and any unspent funds remain the property of the funding body. Examples in the guidance section demonstrate how card agreements include the potential for claw back of funds. Though the network hasn’t been able to independently verify the figures, many local authorities are reporting cashable savings of between 5% and 10% of their total direct payments budget by using prepaid cards.

There are also many benefits for the funding recipients

The primary benefit is that prepaid cards are generally available to everyone, regardless of their financial status, as there is no credit element attached to them. Studies suggest that up to 20% of potential service users, including Universal Credit recipients, are unable to open bank accounts or are underserved by their banks due to high charges

Focus groups have shown that the worry associated with handling the paperwork associated with direct payments is a major issue and causes considerable worry. With prepaid cards service users no longer have to submit bank statements, though the funding body may of course choose to ask for receipts if they think there may be a problem. In reality this rarely happens

A recent study has highlighted a ‘poverty gap’ of 15% for those people unable to take advantage of online services or payment facilities. Prepaid cards open up this market to them. In addition, where prepaid cards have been used with young people, for example care leavers, we hear that service users feel more socially included and improve their life skills as a result of using prepaid cards

This section only scratches the surface of the ways in which prepaid cards are being successfully used by local authorities, clinical commissioning groups and commissioning support units in adult social care, children’s service, personal health budgets, appointeeships, Court of Protection orders and other areas where prepaid cards replace the use of cash

How over 100 councils now manage their direct payments

  • They no longer ask service users to open separate bank accounts
  • Funds are loaded onto prepaid cards by BACS, spreadsheet, telephone, online or via Paypoint or in Post Offices
  • Emergency payments can be made instantly
  • Missing service user contributions are automatically notified
  • Monitoring officers work very effectively in a targeted way
  • No time is spent chasing missing bank statements and they don’t have to be securely stored and managed
  • Any spend not in accordance with the care plan is addressed in a timely fashion
  • Claw back of funds is made easy, in particular funds don’t disappear into an estate when a service user dies