What it is

Yet another hybrid card has entered the Australian financial market. It is not a credit card, although it carries a Visa logo. And it is not a debit card, because it is not linked to a bank account. It is a prepaid Visa card.

"Wherever you use a Visa card, you can use the Bopo prepaid Visa card," says Julian Little, director of strategic development at Bill Express, a company that specialises in prepaid systems.

What it offers

The Bopo card can be used to withdraw money from an ATM, pay for goods and services at a shop and buy goods online. The stored value on the card can be topped-up through a number of ways. These include transferring funds by SMS (which might have some appeal for parents whose teenage children need funds in a hurry). You can also transfer money from your bank account to the card, or go into a post office to deposit funds.

The benefit of electronic transactions such as SMS is that once the system is set up, the money can be transferred and is ready to use within five or 10 minutes, Little says.

"Imagine you have a teenage daughter without enough money to pay for a taxi to get home from a party late at night," Bill Express's chief executive, Ian Christiansen, says.

"You can simply SMS funds to her card from your card, all in real time."

Your daughter can then use her Visa card to pay for the cab.

Little says the card will also provide peace of mind to parents whose children are travelling.

Money can easily be transferred to the card, which means that if your son or daughter is away and stuck for cash, you can quickly send money that can be used within minutes.

"There might be a five- or 10-minute lag," he says. "But that money can be transferred 24 hours a day, seven days a week."

Little says sometimes a SMS can be "lost" in cyberspace for several hours, which could affect the transfer of funds. "But that's very rare. SMS is usually very close to immediate."

InfoChoice spokesman Denis Orrock says: "For something like schoolies week [where graduating high school students take off en masse for a holiday destination, most famously the Gold Coast], it might work. You can put $500 on it and top it up if you need to. If the card is lost, the money is not lost."

The card will also allow people with a poor credit history to buy goods online, in a way that also affords them some protection.

A credit card might have a limit of several thousand dollars, Orrock says. But a prepaid card can have a much smaller or more specific limit, reducing the opportunity for cyber fraud or theft.

Little says up to $2000 a month can be transferred to the card but for amounts of more than that, users must go through a 100-point identity check. This is the check banks put you through before allowing you to open an account.

Orrock says if the card had an unlimited stored value and no identity check, it could be used to launder cash.

What it costs

There are no annual fees or charges for the Bopo prepaid Visa card. But once you start transacting, the fees add up.

Withdrawing money from an ATM costs $1.75 a transaction in Australia, or $2.50 to $3 offshore; transactions at retailers will cost 50 cents; transferring funds using SMS will cost from 20 cents for transactions as low as $5 to $3.50 for a funds transfer of $400 or more.

There is also a $1.50 fee charged to your card every time you top up the stored value.

If you don't use the card in three months, there's a $1 a month "dormancy" fee, and if you try to withdraw money from an ATM without having sufficient funds, you could end up with a 30-cent "denial" fee. Little says this covers the cost of the ATM rejecting your request. Bill Express does not have its own ATM network and so pays to use other providers' machines.

Checking your balance can also incur fees. If you do it over the internet, it's free. But checking by SMS costs 20 cents and using an ATM to check how much money is on your card will reduce its balance by $1.

A Cannex researcher, Garfield Wright, says ATM fees of $1.75 a transaction are not at the top end of the market. "Westpac introduced a fee of $2 for ATM withdrawals at machines that are not its own," he says.

Wright says Travelex and EMerchants also have prepaid cards for use offshore. Top-up fees range from 1 per cent of the transaction for Travelex, to 25 cents for EMerchants. Both cards provide international ATM access; Travelex charges $3.75 a transaction, while EMerchants charges $2.

An eBay Australia and New Zealand spokesman, Daniel Feiler, says the online payment system PayPal has 100 million accounts. PayPal can be used in 55 markets and ensures secure transactions. The buyer pays no fees to use the system and money is transferred to the seller using email addresses.

"It was designed as a secure online payment system," Feiler says. "If you are receiving money, you pay a small fee of 1.1 to 2.4 per cent of the value of the transaction."

Like a prepaid card, which is not linked to a bank account, the user's bank account details always remain hidden to limit fraud.

Where it fits

Consumer credit advocates say a stored value or prepaid Visa card offers some protection because the credit limit can be very small. "But it does not represent a great deal for consumers, who are going to pay some high fees to get access to their own money," says Catherine Wolthuizen, the executive director of the Consumer Law Centre, Victoria.

Elena Marchetti, the acting director of the Centre for Credit and Consumer Law at Griffith University in Queensland, says the people most likely to use a prepaid card are those on limited budgets.

"They might have impaired credit histories or be young people just starting out," Marchetti says.

"[But] those fees will add up quickly. And if you deposit money on to the card, the card issuer will not be paying you interest on your balance."

She also warns that cardholders will not be protected under the consumer credit code because the card is not a credit card. "You'd want to know what your rights are before anything went wrong."

Cannex's Wright says a Visa debit card that allows ATM access might be a better bet.

"Some of the debit cards have account-keeping fees but it might be cheaper than a prepaid card," he says.

"There's not a lot you can't do with a debit card that's already in the market."