Prepaid Credit Cards

It isn’t a riddle, but it sure has the makings of one. You want to give your teenager a little spending power. You know your daughter could use the money to order things online. You believe giving her a plastic will help her learn financial responsibility, too. She can teach herself the finer points of budgeting and being accountable for her purchases. There are, however, two obstacles to your plan. The first is your daughter’s age. She is only thirteen. As a minor, she cannot enter into credit card transactions. The second is her self-control. You’re not sure how much self-restraint she could exercise, particularly when faced with a tempting array of bikinis, handbags, and dresses. So, what do you do? What do you get your daughter? The answer is made up of four words: free prepaid credit cards.

Prepaid What?
Free prepaid credit cards work in much the same way other prepaid cards do. You deposit a certain amount of money. Then, you get to use the card only to the extent your previously deposited amount allows you to. So you see, your cash balance works exactly like your other plastics’ spending limit. Your purchasing power is only as good as your cash balance.

Free prepaid credit cards are the perfect way for you to keep your spending within reasonable limits. While the usual plastic lets you swipe away to your heart’s content, free prepaid credit cards are only useful for as long as you do not exceed the prepaid amount loaded onto your card. This makes it the perfect plastic for people with spending problems, students on a budget, or teenagers who are being taught money lessons by their anxious parents.

A Credit Card That Isn’t Really a Credit Card
Free prepaid credit cards are classified as credit cards. Many claim, however, that this is a misnomer. A prepaid credit card is not really a credit card. Why? To begin with, no credit is offered by the card issuer. The cardholder spends money that has been stored in the card through a previous deposit. It is precisely for this reason that free prepaid credit cards may be issued to minors. Because there is no credit involved, minors are free to own their personal prepaid credit cards.

So Why Get Free Prepaid Credit Cards?
There are advantages to getting free prepaid credit cards. The most obvious is that they are very easy to qualify for. In fact, they can be bought over the Internet. Additionally, many providers do not run credit checks or investigate your income. Because it’s your own money you’re putting up, providers do not put you through hell and back just so you could use your card.

Then, too, you do not pay interest charges on your free prepaid credit card like you would with a regular plastic. Why would you? You are, after all, using your own money. Another advantage is that free prepaid credit cards look exactly like regular Visa or Mastercards They are honored everywhere a regular card is. Furthermore, some free prepaid credit cards help you rebuild credit. Each time you use it, you are creating higher credit rating for yourself.

We live in a world where our buying power is largely based on our credit rating. Clearly, credit is good, high credit rating is to die for, and free prepaid credit cards are for all of us who have spending problems, have been remiss with paying off debts, or are below 18 years of age.

Say there, you, Internet-surfing consumer. Have you been through a divorce recently? Have you been laid off? Have you run up some massive bills because of something unexpected, like your daughter driving through your kitchen wall while she attempts to learn basic automobile skills? If so, you’re probably part of a large mass of people between the Pacific and the Atlantic, specifically those under Canada and just north of Mexico. What population is this? Why, you’re an American with bad credit! Welcome! We meet weekly to consume foods laced with trans fat, burn as much gas as possible, and tank our credit even more in efforts to restore it.

So I bet you feel pretty good after that. No? Well, if it’s any consolation, there are ways out of that population, aside from moving overseas. Does the term ‘prepaid debit’ mean anything to you?

It doesn’t? I suppose that’s why you’re reading this. Well, basically it’s a credit card substantially reduced in risk for both you and the bank that issues it. You select your own credit limit with prepaid debit cards by putting money on the card prior to being allowed to use it. This is to eliminate the risk for the bank, however you as a card holder can still go over your limit and get hit with fees, and aren’t entirely protected from the troubles ordinary credit card holders face. The idea is that you won’t go over your limit as frequently, because you’ll know exactly what your limit is.

Prepaid debit cards are the minor league of credit cards, if you think only in baseball terms. If you’re just starting out and have little to no credit, they’re a fine starting point. If you’ve botched your finances lately, they’re a proving ground to show that you’ve really, honestly, for certain this time, reformed your irresponsible ways and are ready to re-join the masses working to pay interest to the lending institutions.

Many prepaid debit cards report monthly to several credit bureaus. This can be rewarding if you keep under your limit and don’t do anything that would upset the aforementioned bureaus. This feature can take you quite the other way if you do mess up with your card, so be careful and keep a watchful eye on your available balance, either on-line or on the phone to keep from exceeding your limit.

If you’re worried about being the only person in the office with an ‘inferior’ credit card, you can rest assured, you won’t be taunted or made fun of for your poor luck/budgeting skills. Almost all prepaid debit cards look the exact same as every other credit card out there, to ease customers’ unnecessary embarrassment. In fact, many pre-paid cards are issued to those with very good credit to curb those spur of the moment spending urges.

Prepaid debit cards are also obtainable with less-than-shiny credit, which is contributing to their rising popularity. Consider them if you have been rejected for other credit cards and want to increase your standing in the eyes of creditors everywhere.

If you are considering using a prepaid credit card, it is important to understand the difference between it and other bank cards. In this article I will discuss the key differences between these cards.

When people begin using ATM cards in the 1970s, there weren’t many places they could use them. While credit cards were able to be used virtually anywhere, ATM cards could only be used at the machines. However, as time passed, more features begin to be made available to people with ATM cards.

People begin to be able to check their balances and transfer money between accounts. The debit card was soon introduced, and by the end of the 1980s merchants begin to accept them for point of sale transactions. To make these transactions, customers had to enter their private PIN.

As debit cards begin to be used more like credit cards, credit card companies were beginning to discover that they were losing customers. Many people didn’t have the credit necessary to use their cards, and had switched over to ATM and debit cards. The large credit card companies begin to work with the banks in introducing a new type of card onto the market.

This card has come to be known as the prepaid credit card. It differs from a standard ATM card in that it can be used to withdraw money from ATMs as well as make purchases in stores and online. It differs from a standard credit card because it doesn’t come with a balance and funds must be loaded onto it by the customer.

A prepaid credit card differs from a prepaid debit card in the sense that users may be able to increase their credit rating when using it. They also don’t require a PIN to access funds with the exception of when you’re trying to withdraw money from an ATM.

Customers must pay for a prepaid credit card up front, while they are issued a traditional credit card free of charge. This is how the large credit card companies make their money. The money on prepaid credit cards aren’t borrowed like standard credit cards.

The money that the customers have on the card is the money that they have added. They are able to control their own credit limits, and can add money whever they run out. ATM cards are simply used to pull money out of a checking account, but cannot have money actually added to them.

Have you been burned by too much credit card debt lately? Too scared of credit? Had enough of credit card bills? If plastic was a way of life for you and you’re thinking of looking for a good alternative that is as convenient and easy to use, then a prepaid credit card is the perfect choice.

What are prepaid credit cards?
If you’ve used a prepaid phone card or sim card before, then you already have a basic idea of how a prepaid credit card works. You just need to ‘load’ it with money and then use it as you would any regular credit card. It can be used to pay your purchases at any store and is also accepted for many online transactions. You may also withdraw cash from any ATM.

Essentially, a prepaid credit card functions as a debit card, except that a prepaid credit card is a separate account. A debit card is linked to either a savings or a checking account. You just need to open a prepaid credit card account and deposit money, just like you would with a regular bank account. After you pay the fees, which could amount from $5 to $50, the bank then issues you a prepaid credit card.

Many banks offer prepaid credit cards under Visa or Mastercard. Other providers include Western Union, Greendotonline and Rush Card. Prepaid credit cards can also be purchased at selected stores, malls and even gas stations.

Where’s the credit?
The term ‘prepaid credit card’ is probably a misnomer because there’s no credit involved when you use it in any transaction. With a credit card, you pay with the money you donít yet have, but which your banker or credit card company guarantees for you.

With a prepaid credit card, you only spend the money you loaded the card with. For example, if you have $300 on your prepaid credit card, you can’t purchase a $325 item. It’s that simple.

Who can use a prepaid credit card?
A prepaid credit card is a good tool to help you curb your shopping expenses. It is also a good alternative to a regular credit card that you didnít get due to bad credit or for any other reason. A prepaid credit card lets you enjoy the usage benefits a regular credit card can offer.

Advantages
Spending limit ñ a prepaid credit card will only allow you to spend the amount that is left on your account, nothing more. You donít have to go beyond a credit limit because the only limit you have is self-imposed. If you load just $500 on your prepaid credit card account monthly, that’s the amount you’ll get to spend, until the next time you load it again.

Absence of debt ñ regular credit cards let you ‘charge’ purchases and then pay them back at a later date in full or make a minimum payment with interest. Every time you use a credit card, you incur a debt. With a prepaid credit card, you don’t charge purchases, but pay for them outright, on cash basis. You also do not have to worry about monthly billing statements.

Fast processing ñ you’re not required to undergo a credit check and there is no waiting to get your prepaid credit card approved. There is also no age limit.

Disadvantages
Spending limit ñ the advantage of a prepaid credit card is also a disadvantage. While regular credit cards allow you to buy large purchases (such as appliances and furnitures), a prepaid credit card limits your buying power to the amount currently deposited in your prepaid account. Once it’s gone, you can’t buy more until you deposit money into that account.

Fees ñ each time you make a deposit to your account, you pay an additional but nominal fee. Some prepaid cards also charge you a minimum fee for every transaction.

Limit of use ñ you can’t use a prepaid credit card to pay regular automatic payments and some smaller retailers donít accept transactions made with prepaid credit cards. A prepaid card will also not help you establish your credit, much less rebuild it.

When searching around for the best prepaid credit card, the main thing to consider are the fees associated with the card. The costs associated with prepaid cards are arguably the main disadvantage.

1) Application Fees

Some providers will charge you for opening an account, some offer free accounts and some accounts can be set up for free provided you preload the card with a certain amount of money.

2) Is there a monthly fee to use the card?

Again, some cards are free, while others make a small charge, perhaps $10-20. If you find a card that charges a monthly fee, find out what you get for that fee. Do they provide online statements, a helpdesk, additional insurance etc?

3) Will you be charged a fee when you load money into your account?

Does it vary according to the method that you use, for example, cash, credit card or bank transfer? And if you deposit money through a bank, supermarket or post office, will they charge you a deposit fee?

4) Will you be charged when you purchase goods and services on your card?

If so, do the costs vary according to the method of purchase (online, offline etc)? What about the charges for purchases overseas or in different currencies?

5) Will you be charged when you withdraw cash from your account through an ATM?

Will this be higher for foreign transactions?

6) Other Unexpected Charges

Will you have to pay for calls made to the provider’s helpline? Will you have to pay for a courier to deliver your card? Will you have to pay for your card to be renewed when it reaches its expiry date? If you lose your card or it is stolen, will you be charged for a replacement card? Will you be charged a fee to close your account?

Find out all the potential costs that will apply to the way that you intend to use the prepaid card. How much would they cost you over the course of an average year?

Choose the card with fees that will suit your use. For example, if you don’t intend to spend much through your prepaid card, but want it for the flexibility that it offers, go for a card with no setup of monthly fees even although it might have higher transaction charges. On the other hand, if you intend to route most of your monthly spending through your prepaid card, a card with monthly fees and no/lower transaction charges might be best for your circumstances.

The main thing is to compare the prospective costs of each card against other prepaid cards and also traditional credit cards. The costs of all prepaid cards should continue to drop as the demand for them grows and the market becomes more competitive. Better deals for prepaid consumers will appear all the time.

But bear in mind that the lowest costs won’t always be the best option. If you’re in debt and need to cut up your credit cards to prevent you from sinking any deeper, slightly higher fees on the safety and flexibility of a prepaid card may be preferable to keeping your existing credit cards and being tempted further into debt.

It’s also worth taking other practical considerations into account, besides the overall costs, including;

How can you add money to your account? How many options do they provide, bank, online etc? Can you do it 24 hours a day?

Can you manage your account online?

Is there an additional card? Is it free?

What level of purchase and fraud protection does the provider offer?

As with all things financial, shopping around is vital to get the best deal on your new prepaid card.

Prepaid phone cards are very popular among college students, frequent travelers or simply by anyone who wants to save on their long distance and international calls. Rechargeable prepaid phone cards are especially economic because the minutes that are added after purchasing the card are often less expensive. For instance, an AT & T prepaid phone cards can be purchased at most Wal-Mart stores at a cost of approximately $.08 per minute. When recharged, the minutes average $.05 each.

There are a number of reasons why prepaid phone cards are so popular, including the need to sometimes dial into a long distance telephone number for internet connections. Rather than paying the higher charges with the phone company, the user can have their modem dial using the calling card and then connecting to the internet.

While on vacation, hotels charge significant rates for long distance calls, but prepaid phone cards allow the user to dial into a toll-free number before dialing out to a long distance line. This will save big bucks as it will eliminate any long distance charges on the hotel bill.

Some cellular phones, such as Tracfone, operate on a prepaid basis. For each local call, one minute of talk time is equal to one unit (or minute) of prepaid service. International calls, on the other hand, may be significantly more expensive. In an effort to minimize the cost, some cell phone owners opt for programming prepaid calling cards into their phone and dialing out using the toll-free number. International rates will be higher with prepaid phone cards, but will likely be less than that of a cellular or regular phone service. This process will work on either cellular phones or a regular landline connection.

Along that same line, prepaid phone cards are also helpful in sending faxes. The same rules apply with long distance fax numbers, which can be costly through local telephone companies. The use of prepaid phone cards can often reduce these costs.

Toll-free numbers are free at payphones, so if you find yourself having car trouble or needing to get in touch with someone and the only phone nearby is a payphone, don’t worry about having the right amount of coins or having to call collect. If you have a prepaid phone card with you, the call will be routed through the toll-free number at no additional cost to either you or the person whom you are calling.

In addition to the aforementioned advantages, prepaid phone cards are simple to use, easy to recharge from the store of original purchase, online through the prepaid phone cards customer service or via the toll-free number listed on the back of the card.

Prepaid debit cards are one of the more safe methods of building credit for a consumer, as well as one of the more safe methods of issuing credit for a bank. The basic commonality all prepaid cards have is that a deposit of some kind must be made by the person before the bank will grant them credit.

Card varieties differ in the amount of credit given based on the deposit, but the typical limit is 100% of the deposit. Over time, some issuing companies will permit the consumer leniency and increase the amount of credit given in proportion to the deposit.

Why, you may ask, is this necessary? Prepaid debit cards sound like a way to give your money to someone else before you spend it. From outside the perspective of the world of credit, yes, it does seem redundant. But take a look at this hypothetical situation, from the perspective of a consumer, and hopefully some light will be shed on the usefulness of prepaid debit cards.

Carl was living it up. He had a six-figure salary, a wife to make all other husbands jealous, a new Land Rover, and an upscale apartment. The thought of credit issues was laughable at this pristine moment in his life.

But something happened. Carl’s luck began to turn. His beautiful wife, an amateur tennis fiend, was taking far too many lessons with her 25 year old Italian instructor, specifically at his private retreat where her cell phone curiously could not get reception. Carl’s company hadn’t made the mark for the quarter, and people at corporate were hunting heads. Carl’s head, recently bald because of stress from the Mrs., must have stuck out, because he was the first one fired.

Then the divorce started, and while Carl was quite sure that he wasn’t to blame for his wife’s infidelity with someone half his age, she none the less made off with the car and apartment, and some serious alimony payments to come from Carl. Carl’s credit score plummeted as he defaulted on his bills. He was left a broken, unemployed, bald man who could never watch tennis again.

When things leveled off years later, Carl wanted to rebuild his credit, though no credit card companies would accept him. He needed to find a way to transfer his cash into the world of credit, just so he could show that he’d make good on some payments.

As you can guess, Carl’s answer is a prepaid debit card. He can show the bank that he’s legitimate, in a way that only giving them cash can. The bank put credit on his card; Carl purchased Rogaine and a low-powered anti-depressant; and bingo, his credit began to return.

So, if you find yourself in such a situation, needing credit but inspiring no confidence from issuing companies, prepaid debit may be the way to go. Additionally, on a more serious note, pre-paid debit cards are increasingly used by those with relatively good credit as a method of controlling their spending. If there is not enough balance available for a charge, the charge will be denied. And there is no mandatory payment due at the end of the billing cycle.

The idea of a prepaid credit card has been around for a number of years, but it’s only now, with the level of personal debt soaring, that it has really started to take off.

But what is a prepaid credit card? How does it work? And most importantly, can it help you avoid getting any deeper into debt?

The Basic Idea

If you’re familiar with the idea of a prepaid phone card or a prepaid gift card, the idea won’t be new to you. It’s basically just a credit card without the credit. You load money into your card account and can then spend it using your plastic card as you would with a normal credit card.

These prepaid credit cards are accepted by hundreds of thousands of retailers and online merchants.

Dozens of financial institutions offer prepaid accounts backed by either Visa and Mastercard so they can be used globally. In fact, anyone who accepts credit cards will be able to accept your prepaid card.

And the uses are almost endless;

Top up your cell phone

Pay your bills

Buy groceries and petrol

Shop online

Book flights, hotels, tickets

Hire cars

Transfer money to family and friends

You can even withdraw cash from your account at millions of ATMs all around the globe

And once you’ve spent the money in your account, you can “recharge” it with more money.

The Benefits

The main benefit is that these cards are extremely flexible. You can load money onto your account using cash, bank transfer, or even using another credit card (but that’s probably best avoided if you want to avoid debt).

And because most prepaid cards are backed by Visa or Mastercard, you can use them anywhere in the world as you would with a traditional credit card. In fact, the use of these cards is so similar to credit cards that they’re usually called prepaid credit cards, despite the fact that credit is not involved.

The only difference is that you have to fill up your account with your own money before you use your prepaid card, which brings us to the other main benefit. It’s impossible to get into debt using one of these cards, because if you don’t have any money in your card account, it won’t be accepted.

That gives you more control over your spending. It allows you to set a budget and put that amount in your account. There’s no risk of overspending on one of these cards, which is a major advantage if you’re trying to escape debt or are worried about getting into debt. And as with credit cards, you’ll receive a regular breakdown of your spending on the card, which is great for keeping track of your spending.

And because you’re not advanced any credit, there’s no interest to pay and no credit checks to get one of these accounts. That means everybody is eligible to get a prepaid card, even if you have a bad credit record.

Other benefits include;

Travel: These cards have the same travel benefits as normal credit cards. They’re accepted worldwide, especially those backed by Visa and Mastercard. You can withdraw cash from millions of ATMs across the globe. If you select the right prepaid card, you’ll also be able to take advantage of foreign exchange services without paying fees. And if you lose your card, just contact your provider and they’ll provide you with a new one.

Safety: If you use your card to make a purchase (by phone, internet or in person) and it is used fraudulently, the provider of your card will cover the loss just like a traditional credit card. These cards are also safer than carrying cash, which brings us to the final prepaid benefit.

Children: Prepaid cards are the perfect way to provide your children with a safe way to have access to money that you can control. Many prepaid cards are open to people of all ages, although as with traditional credit cards, some companies restrict the use of their prepaid card to people aged 18 and over.

As for the debate over whether it’s a good idea for children to be allowed a prepaid card, some people argue that it will make children more financially aware from an earlier age. They claim it will teach them to understand the value of money and develop better money management skills as they grow up. It will allow them to budget without the risk of getting into debt.

Other people claim that it will encourage them to develop reckless spending habits, especially if their parents keep topping up the account. If parents are too generous, their children could get used to the pot that never runs dry, and get into serious debt when they eventually get their own credit cards.

Ultimately, it’s a decision that all parents will have to make for themselves, but if used responsibly, the benefits of prepaid credit cards heavily outnumber the disadvantages, for all users.

If you’re having trouble getting approved for a credit card, a prepaid debit card may be just what you need. Unlike many regular credit cards, prepaid debit cards do not perform a credit check when you apply. So if you’ve had trouble with credit or have no credit, you’ll still be approved for a prepaid debit card. And these cards come with other benefits as well. A prepaid credit card can be the first step down the path to better credit.

How Prepaid Debit Cards Work

Prepaid debit cards are similar to both credit cards and debit cards. After getting approved for one, you’re able to deposit money into your new account. This is often referred to as ìloading.î The amount of money you load on to your card is equal to your line of credit. When you swipe the card, the money is subtracted from the amount you deposited. As long as you have money on your card, you can make purchases. You can use the card anywhere that debit cards are accepted.

Having a prepaid debit card is similar to opening a checking account on a card. You can deposit money whenever you need to, and spend within your account limits. This system helps keep you far away from credit card debt.

Benefits of Prepaid Debit Cards

One big advantage of prepaid debit cards is that they are safer to carry than cash. You can shop for groceries, get gas, and purchase other items without the hassle of dollar bills crowding your wallet. And prepaid debit cards are accepted all over. If you have a card with the MasterCard or Visa logo, it can be used worldwide.

Another benefit of a prepaid debit card is that you don’t have to worry about paying monthly credit card bills. Since the amount at your disposal is equal to the balance in your account, you don’t spend money that you don’t have. This saves the headaches involved with high monthly bills and balances.

It’s easy to load money on to your prepaid debit card. Most cards let you reload any amount of money by calling and authorizing a transfer of funds. You can also do this online or through an ATM. This lets you control how much you want in your account.

Exploring your Options

Companies offer different types of prepaid debit cards. Before you sign up for one, check for additional fees and features. One card that lets you transfer money for free is the ReadyDebit card. With no credit checks and no security deposits required, you can begin using the card right away. It’s issued through Visa, so you can use it wherever Visa is accepted.

Another one to check out is the Prepaid Visa RushCard. With this card, there are no annual or monthly fees. You can use the card online or over the phone to make purchases. The Prepaid Visa RushCard also offers some shopping discounts at participating retailers.

A prepaid debit card may be just what you need to give your credit a boost. Check through the different options through credit card websites. The application process is easy. Once you get the card, you can start taking steps to get back on track in the credit card world.

For all the advantages that you are offered by using prepaid credit cards, there are some disadvantages you need to be aware of. In this article I will go over these, and this should help you make better decisions when using these cards.

When using prepaid credit cards online, it is important to be aware of where you are shopping. Some sites will scam you, and you may find yourself paying for products or services which you never receive. Shopping online with a prepaid credit card can put you at risk for these types of scams.

When you go out shopping, it is important to check the balance of your card to make sure you have enough to get what you’re buying. You don’t want to stand in a long line waiting to buy something just to get to the cashier and realize you don’t have enough money.

This will frustrate and humiliate you. One of the disadvantages to using prepaid credit cards is unlike cash, there is no way for you to look in your wallet to figure out how much you have to spend. It is important go online and check your balance and transactions.

Another disadvantage to using prepaid credit cardsis that many places and shops do not accept them. This is especially true when traveling to other countries, which may have cash based societies. Small restaurants and shops in foreign countries may only accept the local currency.

Because of this, it is important to carry around small amounts of cash at all times when traveling. Another problem with prepaid credit cards is the potential for abuse by merchants. Many people have complained that when they make a purchase at a restaurant or store, the merchant takes out more money than they’re supposed to.

This doesn’t happen with cash, because when you pay with cash merchants aren’t allowed to have access to your account. The best way to avoid this is to only shop at reputable locations, and check your balance immediately after making transactions. Sometimes mistakes do happen, and it is important for you to catch them as soon as possible.

The last issue that could be a problem when using a prepaid credit card is not being able to access your own money. Some people are frustrated to find that they are not able to withdraw their money from ATM machines when they need it the most. While this doesn’t happen often, it is another good reason to carry some cash at all times.