Are Prepaid Credit Cards Worth It?

Prepaid credit cards can be a real life saver for people who need a credit card but for one reason or another do not qualify for one. If you have ever tried to rent a car, buy products or services online or do any variety of things in today’s world you may have found that it is almost impossible to do so without a credit card.

So, what is a prepaid credit card? That is a good question because a prepaid credit card does differ from a debit card in that you have to pay a fee to put money (load) on the card each time you want to raise the amount of money on the card or when you have used all the funds in the prepaid account. With a bank debit card the money is pulled from your checking or savings account. You do not have to pay the bank to use it; just keep enough money in your account. With a prepaid credit card you can use it for the majority purchases requiring a credit card. The greatest exception is something that is set up on a monthly billing cycle then this type of card could possibly be denied depending on the service that you are trying to purchase. A good prepaid credit card is usually accepted anywhere that credit cards are accepted.

There can be many different reasons for someone to choose to use a prepaid credit card. The biggest reason that most people give is because they are unable to obtain a credit card with a line of credit. This is usually for a number of reasons such as a run of bad fortune. Some of these possibilities include loss of job, loss of home, extensive medical bills or just bad health. Another reason that people will use this type of card is if they have no credit. They may have never have worked outside of the home and never needed to borrow money. Or the situation may be that they just do not want the interest payment and fees of having a line of credit.

It may seem unusual for someone to not want a credit card with a line of credit especially with the low fees and interest that goes along with the card. Even though prepaid cards have a fee it can be small in comparison to any that may be added automatically onto your line of credit. It is always harder to pay back money borrowed for a card than it is to spend that money. Most people have intentions of paying the balance off right away but may just not be able to do so. That is why there is so much credit card debt.

Prepaid credit cards can be an excellent way to go for a lot of people that may have difficulty getting a credit card with a line of credit. These types of cards allow you to have most of the buying power that a credit card has with the exception that you can not go over your limit. This type of card cannot repair your credit but neither does it leave a black mark on your credit record.

Write to Phil Henry at phil@creditdonkey.com

Share this on Facebook or Twitter