What is a prepaid credit card?
As the consumer’s world moves toward cashless shopping for safety and security, credit card proliferated and have been widely accepted and used in a multitude of transactions. However, because it provides a seemingly unlimited purchasing capability, it was not long after the users were burdened with very big card balances and increasing interest rates and finance charges as a result of their tendencies to overspend. This is the background for the birth of debit cards and prepaid cards.
Both cards, as opposed to credit cards function in the same way. They must maintain an available cash to be able to make a purchase. Each purchase is automatically debited to the total remaining amount in the card. These two cards on the other hand differ in their very nature; a debit card is usually attached to a bank account which means that the remaining balance of this type of card is the entire amount of the bank account. Prepaid card for its part is reloadable and its remaining balance is easily controlled.
Being reloadable refers to the ability of prepaid cards to contain and maintain the amount of balance as set by the user. This is especially helpful for individuals who are either very strict in regulating their purchases or those at the other end of the scale who lack the discipline to maintain his purchase to a manageable level with respect to his earnings. Prepaid card is also for teens and students who still lack the budgeting skills of an adult. This is a better way to teach the children about discipline in being able to budget their available cash. It is also best for individuals who have no credit history or those with damaged credit reputation. Further, it is also good for people who travel as well as a brilliant gift idea.
This is because a prepaid card has the following features and advantages:
- Getting this card does not require credit scoring or background check on the applicant’s credit history. It simply means that you are guaranteed to be issued with such even upon application. This is why this card could be used by individuals with poor credit rating.
- Because you are using your own money and not the card company’s, you will not incur finance charges with this card.
Consequently, you will not rack up a credit card debt. It is simply because you only spend the money that you already have.
- It promotes a better managed budget and well disciplined shoppers and spenders. You only reload or deposit the amount that you want to spend. If your card runs empty, it means that you have maximized your spending allowance and has reached your budget.
- Like credit cards and debit cards, it is also widely acceptable now in many types of transactions in groceries, a multitude of stores, gas stations, hotels and even car repair shops
On the downside, expect this in your prepaid card:
- The issuing company will charge you for the set up of the card, loading money into the account and withdrawals of cash from ATM.
- It does not maintain a credit limit thus you can’t run to it for cash emergency situations.
- Reloaded money may not be immediately available to the user because of some transactions such as the clearing of the funds deposited into the card.
- It does not bear weight in your credit score because of the lack of credit reporting.
Overall, prepaid card is the rage these days because of its convenience and for its basic advantages especially in terms of budgeting money and avoiding debt. Most importantly, bear in mind that these cards are substituted for money for safer purchases and towards the demands of the emerging society that promotes cashless shopping
Related posts:
- Easy Credit Cards
- Cash Back Visa Card
- No Credit Credit Cards
- 0 Balance Transfer Credit Cards
- The Benefits Of A Merchant Account
Tags: credit card
