A NEW type of plastic card, aimed at children and others with no access to a bank account or credit facilities, is to be launched.

The card can be used to make online payments and will work in the same way as prepaid mobile phone cards with users “topping them up” with cash at newsagents, supermarkets and petrol stations. Card holders will not be able to go into the red.

The companies behind the cards say that they will enable millions of Britons who are unable to go internet shopping, reserve hotels or hire cars online — or even download a digital song for 79p — to be part of the cashless society.

More than two million households in Britain do not have a current or savings account, according to Datamonitor, the market analysts, and many adults do not have a credit card.

Erik Holst-Roness, the chief executive of TeleGlobal, which has just launched its SNAP card, said that the cards could bring huge growth to online shopping. “The beauty of SNAP is that everybody wins, from kids who want to download, to the thousands of families without credit cards and people who don’t want to put their credit details on the internet,” he said.

Rich Wagner, the chief executive of Advanced Payment Solutions, the company behind the cashplus prepaid card, said that the cards were particularly attractive to people who had recently arrived in the country and had not been able to open an account. They had also proved popular with older and disabled people who find it hard to get about, but who do not qualify for credit cards because they are on benefits.

Another market for prepaid cards are gap-year students, who can use the cards abroad and ask their parents to top them up back home. With some cards, canny parents can go online to see how their children are spending their money.

Critics of prepaid cards fear that they could encourage children into bad financial habits by enabling them to spend money that is not theirs if parents continually top up the cards.

But card companies argue that they teach financial discipline because users can only spend as much as they have loaded onto the cards.Philippe Dufour of 360money, the company behind Splash Plastic, a youth card, and Premium, for adults, said: “Because (it) does not offer any form of credit, there is never any risk of getting into debt.”

Although the National Consumer Council has voiced concerns about the targeting of prepaid cards at the teen market, the Child Poverty Action Group, Citizens Advice and the consumer watchdog Which? all say that they have received no complaints about the cards.

There have been concerns too that the cards represent bad value for money. SNAP cards are free, but some cards have signing on fees of £9.95 and some charge monthly fees ranging from £1.49 to £4.95.

SEEING RED

• Banks reject 35 per cent of their own clients for credit card applications

• 40 per cent of card holders have no remaining credit on their card

• Half of all adults do not have a credit card

• It is estimated that 40 per cent of credit and debit card holders fear using their cards online

• 59 per cent of British consumers are reluctant to use their cards on unknown internet sites

• Online retail spending is expected to reach £26 billion in the UK this year

  Source: SNAP and Datamonitor