Prepaid credit cards can be simply defined as branded cards which are loaded with money and used to purchase goods and services. These cards can be MasterCard, Visa or American Express branded. Individuals using these cards usually deposit money into the card and use it to purchase goods and service anywhere they are accepted. Once the individual spends all the loaded money, then it is required that they load more cash into the card in order to use it again. In short, what is in the account is what can be spent, there are no due dates or revolving balances involved.
Who can use prepaid credit cards?
Today, anyone can sign up for a card as long as they meet the requirements stated by a financial institution. Parents are also able to load money into their children’s card which is very important in teaching them good money managerial skills. As for college students, a load in their card from parents means they can be able to buy books, foods and pay any other expense(s).
Benefits of a Prepaid Credit Card
- Prepaid credit cards are usually associated with major card networks i.e. Visa, MasterCard, American Express etc. the card can be used anywhere in the globe including ATM’s that accept them. individuals can also be able to purchase goods online from reputable stores such as eBay and Amazon. Bills can also be paid online which makes life easier for users.
- The cards assist those with poor credit or none at all. This is possible since you don’t have to go through a credit check to qualify and also you can’t spend money that is beyond the value in your balance. First time card holders such as teens are the best people to have the prepaid credit cards since they learn to use the card well without the temptation of having to overspend.
- Prepaid credit cards come with amazing features besides the ability to purchase goods conveniently anytime anywhere. These features include: authorizing of payment to creditors; setting up recurring payments for monthly bills; online transactions; and ability to withdraw money at any ATM that accepts the card.
- When loading money to your card, you don’t have to queue in long lines in financial institutions to do so. Prepaid credit cards can easily be topped up through: transferring money from your PayPal account; transfer money from a bank account; reload in retail stores such as Wal-mart etc.
- Prepaid credit cards can be a major cost saving tool. By loading money to the card and using it to purchase products and services directly, one is able to save on transaction and withdrawal fees. Actually, most people with regular bank accounts opt to have the cards for purchasing goods and services efficiently and effectively.
- Prepaid credit cards offer a sense of security. If the card gets lost or is stolen, the card holder is able to report the theft to his/her banking institution subsequently triggering the card to be cancelled so that no money can be withdrawn or used by the unidentified person. The bank or financial institution will then issue another card to the individual and some will even restore the balance that was there before. this means that they won’t charge for issuance of the new card.
Disadvantage of Prepaid Credit Card
These cards are subject to high fees and interest rates. The fees can be charged on; purchasing of the card; adding cash to your balance; withdrawing from an ATM; checking your balance etc. The card can also be charged with a monthly maintenance fee whether you are using it or not.
How to Apply for a Prepaid Credit Card
There are different ways to apply for this card. One may visit a banking or financial institution in order to apply for one. However, with the technology advancement that is seen in recent times, individuals can be able to apply online for a card. This has been an efficient and effective way which has seen many people save on time and money.
Prepaid credit cards and credit scores
Most people usually ask this query. It is important to therefore state that regardless of you credit history you can always get a prepaid credit card. However, when it comes to improving your credit score, this card cannot be able to assist you in achieving this. This is due to the fact that the card doesn’t record any borrowing or repaying transactions, meaning the institutions that support this card do not report to the credit bureaus. If looking to improve you credit score, a secured credit is the better alternative. The card is similar to the prepaid credit card in that there is a certain deposit you have to make to get the card. However, the deposit cannot be withdrawn as it acts as collateral in case an individual is unable to pay their credit card balance.