Advantages and Disadvantages of Prepaid Credit Cards

Using plastic to pay as you go is very convenient; you don’t have to worry about carrying a lot of cash that might get misplaced or stolen. In fact, it is nearly impossible to function in society today if you don’t have a credit card or debit card.

Some people find themselves in a financial bind with bad credit and can’t get traditional bank cards. For them, prepaid credit cards are a good option. There are many other reasons you might want to use a prepaid card too. Let’s look at some of the advantages of using these cards.

Use It Just Like A Credit Card

In most cases, you’ll be able to use prepaid credit cards just like you would any other bank card. That means you can shop at the mall or shop online and use your prepaid card. As long as the store or business is set up to take credit cards, they are able to take prepaid cards too. This is very beneficial for people who want to shop online but don’t have a traditional credit card.

Protect Your Privacy

Even if you do have other credit cards, you may wish to use a prepaid one when you shop online in order to protect your real financial data. You can put any amount you choose on the card and it is not linked to any of your other accounts, so if someone does steal your numbers, there is a limit as to how much damage they can do compared to the havoc they could cause with a traditional debit or credit card.

Easy To Get

Prepaid credit cards are easy to get also. You can pick one up at your local mall or other retail location such as grocery stores, pharmacies, and convenience stores. There is nothing to mail in and no approval process to go through. Just pick up a card, add money to it, and you are ready to start using it right away.

Teen Training Tool

Credit cards are convenient for teens too but if you are not ready to hand over the family credit card to your kids, consider getting them prepaid credit cards. There is no way they can go over limit or rack up huge bills. They will be learning financial responsibility with little risk to you.

Control Your Spending

If you have a difficult time sticking to a budget, prepaid credit cards can really help. Simply load the maximum amount you want to spend for the month and you won’t be able to go over your budget since your card won’t work once you have depleted all of your funds.

Acts As A Bank Account

If you can’t get a bank account for some reason, prepaid credit cards can be a lifesaver. You can have your paycheck or social security check loaded directly onto your card so you can access your money right away and won’t have to worry about cashing checks or carrying cash around. You’ll be able to function in society just as well as you could with a traditional bank account and debit card.

Make Great Gifts

When you are stumped for gift ideas, why not consider a prepaid card? These work just like gift certificates of yesteryear but prepaid credit cards can be used anywhere so your gift recipient isn’t locked into shopping at any one particular store.

Just like anything else though, there are disadvantages associated with prepaid credit cards too. Let’s take a look at some of those now.

No Credit Building

If you can’t get a credit card because you have poor credit, you need a way to rebuild your credit score. Prepaid cards can’t help in that area. No payments are made since purchases are deducted from your initial balance, so there is no monthly reporting to credit bureaus. You’ll not be able to rebuild your credit with a prepaid card.

Not Accepted Everywhere

While prepaid credit cards are accepted almost everywhere, some businesses have decided not to accept them and you should be prepared for that in advance. For example, many rental car companies do not accept prepaid credit cards during checkout when you pick up your car. You can usually use a prepaid card for paying for the rental upon return however. This can cause an awkward experience that might leave you stranded without transportation so it is a good idea to keep in mind prepaid cards are not accepted everywhere.

Fees and Expiration

Terms and conditions vary among issuers of prepaid credit cards so you want to play close attention. You may be charged a monthly or yearly service fee. It is also possible that your card will expire at a certain time even if you still have money left on it. Be sure to read the fine print and if you see something you don’t like, look elsewhere since there are several cards to choose from.

May Not Work For Recurring Payments

Depending upon the type of prepaid credit card, and the business you are using it with, you may not be able to order a subscription that has a monthly fee or buy a product with the purchase price split over several months. This is because the company runs the risk of your card not having a high enough balance month after month. Still, in many cases, you can use prepaid cards for these purposes, just be aware there’s a possibility you will run into trouble.

No Credit

Of course, prepaid credit cards are not based on credit at all. You must have the funds available up front to load onto the card. So if you are really strapped for cash, prepaid cards won’t be any help. If you want an actual credit line, you will have to apply for a traditional card or loan.

You can see there are advantages and disadvantages to prepaid credit cards. For many people, they are a real benefit as these cards enable them to buy products conveniently. Others may not need them but find them handy for privacy or budget reasons. If you can’t get a traditional credit card or debit card, prepaid credit cards are the next best thing.

About the Author: Mirsad Hasic is the owner of of best credit card deals, a consumer oriented site where he will show you how to find a credit card for your specific needs and also give you valuable tips on how to reach credit card debt relief.