PrePay Credit cards
Prepay credit cards work the same way traditional credit cards do and can be used to pay for all manner of goods and services at virtually any place that accepts regular credit cards. The main difference between a prepaid card and a regular credit card is that with a prepaid card you need to fund the account before making purchases. And since you don’t work with a credit line with prepaid cards, they are ideal for people who want to enjoy the benefits of owning credit card, but who also don’t want to shoulder the burden of credit card debt and credit card interest charges.
Advantages of Prepaid Credit Cards:
• Prepaid credit cards are much easier to get than standard credit cards. Usually just about anyone and everyone who applies for a prepaid card gets their application accepted. You can even order a prepaid credit card online from the convenience of your home. Usually there are no credit checks or minimum income requirements.
• When using a prepaid card to pay for goods and services, you don’t have to worry about amassing debt. You simply fund your prepaid card, spend the money at your leisure, then top up the card up again.
• With prepaid credit cards, you don’t pay any interest as a result of making purchases.
• Prepaid credit cards don’t charge annual, late payment or over-the-limit fees that often accompany standard credit cards.
• A parent can give a teenaged child a prepay credit card to use for college spending.
• In general, prepaid credit cards provide the same fraud protection that regular credit cards offer. If you own a prepaid credit card with fraud protection, you can, in most circumstances, have charges that you didn’t make refunded back to your card.
Disadvantages of Prepaid Credit Cards:
• The vast majority of prepaid cards require you to pay a setup or activation fee when you first open a prepaid credit card account.
• Certain prepaid cards also charge a monthly maintenance fee.
• Another drawback to prepaid credit cards is that you might not be able to use them when setting up automatic billing (e.g. having your local utility company automatically charge you for your electricity usage each month.)
• When using a prepaid credit card, no activity reports are made to the three major credit bureaus (TransUnion, Experian and Equifax.) This means that transactions made using a prepaid card will not affect your credit history. This can be considered either an advantage or a disadvantage, depending upon your spending, budgetary and payment habits. If you are the type of person who misses a credit card payment every once in a while, then using a prepaid card for your spending would probably be advantageous for you, since you wouldn’t have to worry about a missed payment being reported to the credit bureaus. On the other hand, if you are trying to improve you credit score and you are very disciplined about making timely payments to your creditors, then you’d probably be better off getting a standard credit card with the best possible terms and conditions.
Prepaid credit cards have been gaining in popularity in recent years, and are likely to continue doing so. A standard credit card is a great financial tool when used responsibly, but standard cards aren’t for everyone. Bottom line: prepaid cards are a safe, convenient and debt-free payment alternative for all types of consumers.
Prepay credit cards and bad debt.
In the past, if you had a bad credit history then you were unlikely to be able to get a credit card. However, prepaid credit cards are becoming increasingly available, and it doesn't matter if you have had financial problems in the past. Although known as 'prepaid credit cards' these latest cards are in reality a form of debit card. There is no credit offered, just the advantage of being able to use plastic rather than cash. This is helpful for transactions on the internet, booking holidays and hotels and transferring money.
Application process
Applying for a prepaid credit card is easy as there are usually no credit searches necessary, because the card providers are not offering you credit! The application is usually fairly quick and simple.
Pre-loading your card
You will need to pre-load your card before use and this can be done in different ways, usually by direct transfer from a bank account,
Prepaid credit card fees and security.
Check carefully before signing up that there are no hidden charges. Firstly, is there a fee for opening a card account? Are there any monthly or annual service charges? Are there any charges when you top-up, such as with a direct deposit reload or bank account reload? Are there withdrawal fees if you use ATMs? Also find out whether there are fees when you use your prepaid card for purchases with a merchant or online. All these charges can mount up and as there are now more prepaid cards becoming available, with the increased competition not all card providers are charging fees. Compare the various card options, it's easy with an online comparison site and can save you money. It is advisable to find out what protection the card company offers you, such as if you have a stolen or lost card, or if something goes wrong with your purchase? Also is there a 24 hour helpline?
