Why Use PrePaid Credit Cards

Prepaid credit cards are the perfect solution for people who have had credit problems in the past, or for individuals who think they would have a lack of control with a traditional credit card. They are also a great way to teach teenagers or college students about financial responsibility. Prepaid cards require you to “load” the card with money before they can be used, like a phone card, which helps you control your spending as you will not be able to purchase more than the amount you’ve deposited on the card.

Why Go Pre Paid?

To people who use a traditional credit card, it may seem pointless to have a prepaid credit card. Why not just use cash for the purchase, and avoid the process of “loading” the prepaid card in the first place? The answer is that there are many reasons why a person would need a credit card. Think about car rentals, airline tickets, hotel rooms. Each of these purchases typically require a credit card to reserve your rental, ticket or room. Credit cards are often used as a form of identification. How about making purchases over the internet? You certainly can’t pay cash when you buy online. Using prepaid credit cards is similar to using a debit card that is attached to your checking or savings account. You make a deposit to the prepaid credit card company and that deposit is your spending limit- minus a few incidental fees for loading the card (less than what you pay on a traditional credit card for interest though!) When you’ve purchased up to your deposit amount, you can no longer use the card until you’ve deposited more money.

Advantages of Prepaid Cards

In addition to the obvious advantage of not overspending when using a prepaid credit card, there are no restrictions or qualifications one must meet in order to obtain a prepaid card. There are no credit checks, and your credit score or financial history is never taken into consideration for a prepaid credit card. You do not pay an annual percentage rate on the deposit. You can choose to have your employer deposit your paycheck directly onto your prepaid credit card in most situations- giving you immediate access to your paycheck. While a traditional credit card can squash you with late fees, finance charges, interest rates, and annual fees- to the point that you are often paying three times what you’ve actually spent- you are safe with your prepaid credit card. You will pay only what you purchase.

Disadvantage of Prepaid Cards

The biggest disadvantage associated with prepaid credit cards is also considered an advantage- it’s all how you look at it. Many people find the limit of prepaid credit cards to be a disadvantage since you have to have the money before you can buy something with your card. This limit is an advantage when considering your credit history, and an advantage for people who are working hard to avoid getting into debt. Prepaid credit cards may just be the best option for some individual’s credit card needs. They allow you to do the things that require the use of a credit card, ease in traveling, and you can make purchases online or by phone without any difficulty. Best of all, you are not in danger of spending more money than you can afford to pay back!