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Prepaid Credit Cards |
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Prepaid credit cards are new twists on the popularity of plastic
money. The name says it all. They are cards that function
just like credit cards in nearly all aspects, but you have to pay the
spending limit upfront. It's like a prepaid phone card you can
use to buy anything at all.
There are a lot of benefits to a prepaid credit card, as well as many
different applications for the technology. The most obvious
benefit is that you can't go over your limit. There is no such
thing as over drafting from an account. When the account is
empty, you simply cannot use the card. You have to refill it
before any more purchases can be made. This is very good 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.
These cards are also good for teenagers whose parents may want a middle
step before getting a full service card for their children.
Parents can fill the card with an allowance (or teens can put summer
job paychecks into the card) whenever they want to, and junior gets to
enjoy the freedom and security of credit card spending. Purchases
can also be monitored with this system, which can help a teen increase
his financial savvy. By seeing exactly where his or her money is
going, they will be more likely to develop good habits they can keep
throughout their adult life. An added bonus is that these cards
frequently look the same as full-service cards, which enables teenager
to keep their pride intact when the go out with their friends.
Pre-paid credit cards are also being used for specific
situations. Most prevalent is the Visa Gift Card, which can be
bought in any denomination and given as a gift. Recipients can
spend the money anywhere, any way they wish. Another specific
application is Visa's Travel Money Card. 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. It is also
covered under Visa's Zero Liability Plan, which protects it against
fraudulent purchases, card theft, and identity theft.
A third application that is growing in popularity is the payroll
card. The payroll card is a great way for companies to reduce
payroll costs and help the environment. A payroll card can be
given to every employee of a business and then at the end of the pay
period employees receive a direct deposit of the funds they have
earned. This is available immediately upon deposit, which saves
the employee the time it would take to go to the bank, wait in line,
pay a cashing fee, etc. It also saves the company the time and
money it takes to print and mail paychecks. Employees who may not
have a bank account can take advantage of the system as well.
Since all funds are deposited into the card account, there is no need
for separate checking or savings accounts.
There are a few downsides to the prepaid card. Most cards require
a start-up fee, and while for many companies this fee is minimal, some
of them are substantial. Another downside is that many businesses that
accept automatic payments from bank or credit card accounts will not
accept them from prepaid cards. For most consumers this is a
minimal annoyance, but for some it can be a significant setback.
As with a normal credit account, when selecting a prepaid card it is
best to research your options and make an informed decision on the best
card to meet your individual needs.
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Credit Card Articles > Poor or No Credit > Prepaid Credit Cards
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