Prepaid Credit Cards - Who Should Apply For One?
By: Dave Nichols
Prepaid Credit Cards are unlike typical credit cards as there is no actual line of credit. The card holder loads it with an amount of money, up to the predetermined card limit and then uses the card to make purchases in the same way as a typical credit card. So, who should consider applying for one?
What are Prepaid Credit Cards?
PrePaid Credit Cards are not a really a credit card, since no credit is offered by the card issuer: the card-holder spends money which has been "stored" via a prior deposit by the card-holder or someone else, such as a parent or employer. However, it carries a credit-card brand (Visa, MasterCard, American Express or Discover) and can be used in similar ways just as though it were a regular credit card.
Who should consider applying for one?
A major credit card is needed to make reservations for hotels, motels, car rentals and airline flights. Credit cards are also necessary when placing orders online or over the phone. So, pretty much everyone needs a credit card these days but who specifically can benefit from a Prepaid Credit Card?
Teenagers and Students
Perhaps your child mainly shops online or would prefer not to carry cash but due to a lack of any credit history they can not apply for a regular credit card. (And, let's face it you probably wouldn't want them to have one anyway). But, remember, it can be a great way to teach them basic budgeting.
Students often need credit cards for a variety of reasons. They make it easier to purchase a variety of goods and services and are great to have on hand in case of an emergency. But maybe they're not quite ready for a regular credit card. A prepaid credit card is just what they need.
People with poor or bad credit
Some people are rejected after filling out a credit card application because of poor or bad credit thereby denying them the advantages and convenience of a regular credit card. Does this mean a person with bad credit has to miss out completely? Not if that person has a prepaid credit card.
A prepaid credit card account is opened by depositing money into that account, much in the same way you would make a deposit to open a checking or savings account. Once you have money in your account, you're issued a prepaid credit card that can be used anywhere one would use a regular credit card.
For those with bad credit, the benefits of a prepaid credit card far outweigh the risks. They're able to reserve rental cars or hotel rooms, and don't have to worry about credit card bills and interest payments later.
Advantages of a Prepaid Credit Card
The best part of the prepaid credit card is that you can charge to your heart's content and you won't be in any debt. The money is yours and once it's gone, you can't spend any more until you make another deposit. There are no bills and no interest charges. It's the same principle as using a debit card linked to a savings or checking account.
Disadvantages of a Prepaid Credit Card
Well, you'll have to pay a small fee to set up the account. In addition, you'll have to pay additional fees every time you deposit more cash into your prepaid credit card account. Also note, certain types of service , like a monthly internet subscription may not accept a prepaid credit card.
Conclusion
If you're frustrated because a credit card is necessary to get by in today's world, but can't (or don't want to) apply for one consider a prepaid credit card. You'll have most of the advantages of a credit card, and you won't have to worry about interest charges. A prepaid credit card can be a pretty good deal.
Dave Nichols owns CardsWithRewards a website dedicated to finding the right Credit Card for you! To find out more about Prepaid Credit Cards and view card comparisons visit the site today!
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