Sunday, November 4, 2007

Prepaid Credit Cards The Good And The Bad

What are the Downsides to Prepaid Credit Cards?

There are a number 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. In addition, you'll most likely have to pay additional fees each time you deposit more cash into your prepaid credit card account; perhaps not as much as the initial fee, but a fee, no less. Some cards will allow you to add more funds for free, but may charge a monthly "maintenance" fee instead. Another downside is that many businesses that accept automatic payments from bank or credit card accounts may 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 any credit product, when selecting a prepaid card you should always do your research and make an informed decision on the best card to meet your individual needs. As stated previously, there may be a number of different fees associated with using a prepaid credit card, some of which might be high enough to offset any benefits. A prepaid credit card will generally carry more fees than a secured or unsecured credit card (presuming you pay them off monthly) therefore a prepaid card may only be a good option for those who cannot obtain any other form of credit, but require the convenience of a credit card.

What are some of the Benefits of a Prepaid Credit Card?

There is no such thing as over drafting your account; you cannot exceed your limit.
Prepaid credit cards can be a big advantage to low-income consumers who might otherwise be stuck dealing in cash, unable to make such basic transactions as paying for gas at the pump, paying bills online, or making car rental or hotel reservations.

Contingent on the card you select, your money may be protected if your card is ever lost or stolen. Prepaid credit cards are a convenient way to pay for goods when traveling, even outside the U.S. Prepaid credit cards are often marketed to teenagers for shopping online without having their parents complete the transaction, or as a convenience for parents wishing to provide funds to children away from home.

Obtaining a prepaid credit card is easy, fast, and requires no credit check. Some prepaid credit cards today report card history to major credit bureaus, so cardholders may be able to build or rebuild their credit using a prepaid credit card without the risk of damaging it along the way.

In summary, prepaid credit cards are a good solution for anyone who does not want to be tied down to a banking institution, anyone wanting a more secure way to carry their money than simply cash, or anyone having troubles being approved for a credit card. In today's society that is more and more cashless, somebody who doesn't have access to cashless transaction vehicles is at a major disadvantage.

1 comment:

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