Prepaid Credit Cards

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.