Advantages And Disadvantages Of Using A Prepaid Credit Card

Prepaid debit cards are now being used as another mode of payment. It is used just like a credit card but it has more advantages since you have a smaller chance of encountering debts issues.

In this article, we shall tackle the advantages and the disadvantages of using prepaid cards.

The Advantages of Using a Prepaid Card:

- Prepaid cards are being used worldwide and so you can bring it with you on your travels. Carrying a prepaid card is safer than carrying cash. Choose a prepaid card that has the Mastercard or the VISA logo to ensure that your card will be accepted in more establishments.

- Reloading can be done in various ways- via online, ATM and over the phone. You can reload as much as you want.

- Prepaid cards allow you to make purchases without cash.

- It is impossible to encounter overspending since the credit limit depends on how much money the cardholder has in the account.

- It is highly recommended for those with bad credit history since background check is not necessary when you apply. Through smart use of the prepaid card, poor credit rating to be improved over time. It is a good tool to control spending.

- There are no monthly credit card bills to pay.

- The application process is not as difficult as when applying for a credit card.

- You are not going to be charged with interest rates.

- Unplanned purchases can be avoided since you are not carrying cash or a credit card in which you can swipe now and pay later. You can manage your budget more effectively and limit your purchases.

The Disadvantages of Using a Prepaid Card:

- You need to make sure that you have existing funds in your account before using your prepaid card for payment. Imagine how embarrassing it would be if you try to use your prepaid card at the cashier, only to find that you don't have any money left in your account.

- There is an annual fee required to keep your card active. Although the cardholder is not required to keep a maintaining balance, you must submit the yearly fee to keep your account from closing out.

- You are charged a fee for each purchase or transaction. Every time you use your prepaid card for payment, you must pay an additional cost for the processing of payment. This is why prepaid cardholders are advised to plan their purchases to reduce the extra charges.

- If you don't choose well, you can end up with a prepaid card that imposes high annual fees and expensive transaction charges.

- Not all issuers offer credit reporting provision. If you choose an issuer that does not report payments to the major credit bureaus, you cannot use the card for building credit or rebuilding bad credit.


Copyright (c) 2009 Tara Tiemann