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Enjoying the Benefits of a Prepaid Credit Card

By: Michael D. Strauss

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Prepaid credit cards are a type of plastic payment method that is becoming more and more popular, as although they can be used in much the same way as a standard credit card, they feature several crucial differences that can really make them more attractive to certain groups of consumers.

The biggest difference is that these cards do not in fact offer any credit facility, and so the name 'prepaid credit card' is perhaps a little misleading, and a better alternative is simply 'prepaid cards'. In order to spend using the card, it must first be 'loaded' with funds via a bank transfer, by debit card over the telephone, or in some cases over the counter at the bank. Once the money has been transferred onto the card, you are free to spend up to that amount in all the same places and ways that you can use a normal credit card.

But why is this an advantage? Firstly, many people are rightly concerned over the possibility of building up excessive debts by unrestrained use of credit, and prepaid cards allow all the convenience of credit cards without this risk.

Secondly, because there is no credit being extended, the approval process is usually very simple - in fact, it's much harder to be refused a card than to be accepted! There won't be any credit check carried out, and for this reason even people with very poor credit ratings are able to enjoy the benefits of paying by plastic online and by telephone, without their previous financial histories getting in the way.

The lack of credit checks also means that in most cases minors are eligible to carry the card, although in some cases it must be taken out in a parent's name. This means that parents of teenagers can load up the card for their child to use, which will be much safer than carrying cash. Should the card be lost or stolen, it can be quickly cancelled and no funds will be lost.

Prepaid cards can also be given as gifts, much as with the traditional shopping voucher schemes, but with the advantage that the gift recipient is free to spend the money anywhere they choose, not just with the retailer who issued the vouchers.

So far so good, but as with most things, there are also drawbacks. The first one is that there will normally be a flat charge made for opening an account, to cover administration costs as well as the actual physical cost of making the card. This will, however, not usually be too high.

A more serious drawback is that a fee of around 3% will be levied on everything you buy with the card. This figure may not seem too high, but in comparison to a cashback card which will actually pay you to make purchases, it's certainly not something to take lightly. You may also have to pay a flat monthly fee just to carry the card, even if you don't make use of it.

If your credit rating is good, and you're confident that you'll be disciplined enough to pay off your balance in full every month, then a decent cashback or rewards card would make a better choice than a prepaid card. However, if you have a poor credit rating, are under the age of 18, or are simply wary of taking on debt, then a prepaid card can certainly be an attractive way of enjoying the convenience of paying with plastic.

Article Source: http://depositarticles.com/

Michael writes for Card Sense, a UK credit cards information and review site, where you can read more about prepaid credit cards along with many other topics related to credit.

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