As the name depicts, Prepaid credit cards are just like credit cards but the spending limit is paid in full before use. It’s like a prepaid phone card which you can use to buy anything at all.
Benefits of Prepaid cards
Saves you from going into debt
A prepaid credit card offers many benefits and has many different applications for the technology. The biggest advantage is that you can’t go over your limit. When the prepaid money finishes and the account is empty, you simply cannot use the card. The account has to be refilled before any more purchases can be made. Prepaid credit cards are perfect for people who have poor credit history or impulsive spending habits. It can help people avoid debt and be a good first step in rebuilding a low credit score.
Perfect for teenagers
Prepaid credit cards are perfect for teenagers as they have a limit set, which they can’t go beyond. Parents may want a middle step before getting their children a normal credit card. Parents can fill the card with an allowance, or teenagers can put their part time job’s check into the card and in they can get to enjoy the freedom and security of credit card spending.
It is also possible to monitor your purchases with prepaid cards. So the children can see where all their money is going and this will help them to develop good habits, which will benefit them in the future when they get their real credit cards. Also, most of these cards look the same as full-service cards, which enables teenager to keep their pride intact when the go out with their friends.
Can be used for specific occasions
You can also use pre-paid credit cards for specific situations. One of the most famous prepaid cards is the Visa Gift Card, which can be bought and given as a gift. Recipients can spend the money anywhere, in any way they wish.
Another type of prepaid card is the Visa’s Travel Money Card. The good thing about this card is that it can be loaded directly from an ATM with funds from a checking or savings account, and then carried in place of cash or travelers checks. The card is also covered under Visa’s Zero Liability Plan, which protects it against fraudulent purchases, card theft, and identity theft.
Payroll cards
A payroll card is another category of prepaid cards, which is getting popular day by day. It is also a great way for companies to reduce payroll costs and help the environment. Businesses can give payroll cards to their employees, and at the end of the month, deposit their pays in their respective cards. The employee can use the money directly from the card instead of going to the bank, waiting in a line and paying a cash fee for getting the pay.
The company can also save time and money that is used to print and mail paychecks. It can also be used by employees who don’t have a bank account as all the money is deposited into the card account; there is no need for separate checking or savings accounts.
Disadvantages of prepaid cards
There are a few disadvantages of a prepaid card. Most of the above mentioned cards require a start-up fee. This fee may be minimal for many companies, but some of them are substantial. But the biggest disadvantage is that prepaid cards may not be accepted by every business. Businesses that accept automatic payments from bank or credit card accounts will not accept them from prepaid cards. Therefore, just like when you are selecting a normal credit card, it is best to do some research and view the pros and cons before opting for the prepaid card of your choice.
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