What are Prepaid Credit Cards and Should You Have One?

First of all, prepaid credits cards are actually more like debit cards than credit. They look and spend like credit cards, but, nonetheless, there’s no credit given with them. So, technically, that kind of makes them debit cards because when you use them. You can’t get purchases on credit, which is considered spending the banks money. Instead, you are spend you own.

Addtionally, you don’t need a bank account like a traditional debit card in order to obtain a prepaid card. You just load money directly onto the card, using the balance to make purchases. When the balance gets low or is used up, you simple add more money by reloading or throw the card away.

Prepaid cards are combined with major card networks, such as Visa and Mastercard, so that they can be use anywhere debit and/or credit cards can be used. You can use these cards to pay for gas at the pump, to go shopping, or even to pay bills, buy merchandise, or pay for services online. In fact, some places may be more willing to accept a prepaid card instead of credit cards due to the lower fees attached to accepting them as well as the guarantee of being paid.

In addition, prepaid credit cards can be an alternative to using a bank. As a matter of fact, nearly sixty-eight million people in the US alone don’t have a checking account. For them, prepaid cards offer an easy way of making card-based purchases without having to include the inconvenience of dealing with a bank. Not only can you use a prepaid card for booking hotel rooms and renting cars, but because they are issued with account and routing numbers, you can also direct deposit your paycheck directly to the card. Now that we’ve explained what prepaid credit cards and what they can do, here’s some things to consider when deciding whether or not you should have one.

1. No Credit Check

There’s no credit required, but neither do they build you credit, either. Prepaid credit cards’ spending is not tracked by credit bureaus. They were initially designed for those who had bad or nonexistent credit and still are a great option for those who do. However, it’s also good for those who are trying to keep from spending more than a specific amount; it’s impossible to spend more than what you have with a prepaid card. If there’s no money on the card, it’s essentially useless. Nonetheless, the cards are a convenient way to buy things in places where cash isn’t accepted, to avoid getting yourself into credit card debt, and to control your spending while also avoiding overdraft fees.

2. Variety of Features Offered

You can choose a card which allows you to pay bills online, even for automatic bill payments which occur monthly. Some allow you to withdraw cash from an ATM using a pin and some allow you to get cashback like a debit card when making a purchase. Furthermore, you can generally manage your account via an online or mobile app. You can definitely find a card which suits your needs.

3. Options for Adding Money

Reloading is actually easy. You can reload your prepaid credit card at approved retails stores. You can transfer money from a bank or PayPal account. You can use reload cards. You can also have your paycheck direct-deposited onto your card as well. You’ll be able to find a reload option that works for you.

4. No Overdraft Fees (But There Are Fees)

Watch out for what may seem like hidden fees. There is a loading fee each time you add money to the card when loading at a retail store or using reload cards. In addition, there is a monthly service charge as well that will be deducted from the money you load onto the card. However, when direct-deposited you paycheck, if it’s more than a thousand a month, it doesn’t charge a fee. Additionally, most cards also forgo the monthly service fee if you make more than fifty transactions per month using your prepaid card as well. There are some that have other various fees, so it’s best to shop around for the card with the lowest fees. There’s no annual interest, though.

5. Manage Your Money

One of the best things about using prepaid credit cards is that it helps to manage your money. You can neither spend more than what you have or overdraft. You can only spend what has been loaded or direct-deposited onto your card.

All in all, prepaid credit cards can definitely be a life-saver when you need a card and either don’t have one, don’t have good enough credit to get one, or simply don’t want one. For those who would prefer keeping themselves out of debt, it’s the perfect option. There are a few drawbacks, such as the additional fees and the fact that they can’t be used as a credit card, but the positives outweigh the negatives, especially if you need a card and have no other way of getting one. Even if you do have good credit, it’s a great way of limited how much you spend. The best thing to do is to shop around, choose one, and try it out for yourself. If you don’t like it, simply throw it away after spending the amount that was on it.


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