Prepaid Credit Cards

Credit cards have many advantages, but they have a number of important disadvantages as well. One unique way to get the good things credit cards have to offer, without succumbing to the temptation to overspend, is to opt for one of the many prepaid credit cards on the market.

In the economy today, it can be extremely difficult to be without a major credit card. Renting a car, purchasing goods over the internet or by phone, buying a plane ticket or booking a hotel room are just a few of the activities that are difficult or impossible without holding a credit card.

For many people, however, credit problems in the past, or other issues, can make traditional credit cards hard to come by. The answer for those people may be prepaid credit cards. In addition, prepaid credit cards can be a good choice for those who qualify for traditional cards but are afraid of overspending and going into debt.

Prepaid credit cards carry the MasterCard and Visa logo, and they are indistinguishable from standard credit cards. The store will not be able to tell that you are using a prepaid credit card; the prepaid credit card works the same way as a traditional card.

The concept behind prepaid credit cards is easy to understand. The cardholder opens an account and loads the card with cash up front, similar to the way a prepaid phone card works. The prepaid card can be used anywhere Visa or MasterCard are accepted, and as it is used, the available balance decreases accordingly.

Some of the advantages of prepaid credit cards include:

  • Easy availability – Prepaid credit cards can be purchased at many different retailers, including many convenience stores. In addition, no credit check or income verification is required.
  • Prepaid credit cards require only a short application and a small fee for account setup.
  • Unlike traditional credit cards, there are no interest charges with prepaid credit cards, since no balance can be carried forward month to month. When you pay with a prepaid credit card, you are using your own money.
  • You cannot get into debt by using a prepaid credit card, since you are essentially using your own money to make purchases.
  • Prepaid credit cards can be used anywhere Visa and MasterCard are accepted, including most retail stores, most grocery stores and even many convenience stores. In addition, prepaid credit cards can be used to make internet purchases as well.

Of course where there are advantages there are disadvantages as well. Some of the drawbacks of prepaid credit cards include:

  • Prepaid credit cards can be quite expensive. The setup fees on prepaid credit cards can be quite high, ranging from $5 to as high as $50 or more when the account is opened. In addition, there is generally an additional fee of $5 or more each time money is added to the card.
  • You will need cash up front in order to open the account. Unlike a traditional credit card, in which you get a set credit limit according to your credit history and other factors, prepaid cards require you to load money up front.
  • Sometimes prepaid credit cards cannot be used to make monthly recurring payments, like online subscription services or paying monthly bills.

Prepaid credit cards can be a good choice for select people, but it is important to understand the fees and expenses involved with these cards. If you are fearful of overspending and going into debt, or if you are unable to qualify for a traditional credit card, a prepaid credit card can be an excellent way to get the convenience of a major credit card without the financial risk.



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