Benefits and Disadvantages of Prepaid Credit Cards

By Susan M. Keenan

Prepaid credit cards are excellent choices for many people.  In a world that relies on spending and purchasing with plastic, the prepaid credit card can be the answer to ending an escalating path of debt. 

Prepaid credit cards permit the convenience of spending without using cash or checks.  They also limit the possibility of overspending.  The credit limit on a prepaid credit card is determined by the amount of cash a consumer puts to the purchase of the card.  Prepaid credit cards are used in the exact same way as regular credit cards.
 

Benefits to prepaid credit cards

•    The application process to acquire a prepaid credit card is simple.
•    No credit report checks are done.
•    No income requirements exist.
•    No background check on the purchaser is necessary.
•    No interest charges will accrue and add to the cost of using a prepaid credit card.
•    Prepaid credit cards are easily accessible.  They are available for purchase in numerous locations, in fact, anywhere that credit cards are accepted.
•    Prepaid credit cards are widely accepted in the same manner as traditional credit cards.
•    Prepaid credit cards look like typical credit cards.  Therefore, not even the store clerks can tell that you are using one.
•    Prepaid credit cards are terrific options for individuals who have bad credit histories.
•    Excessive debt can be avoided with prepaid credit cards since you can only spend what you have already paid for in advance.
•    They can be used to gradually help a teenager gain control over his or her finances.

Disadvantages to prepaid credit cards

•    The individual making the purchase of a prepaid credit card must have the cash to pay for it up front.
•    Prepaid credit cards cannot be used for any automatic monthly billing charges or payments.
•    A set up fee is usually charged.  This can be quite expensive, depending upon the origin or location of purchase.
•    Keeping an idea of the balance available on the card may prove to be troublesome.  Although this is usually a minor facet, it can be a problem if you arrive at the check out and there isn’t enough money left on the prepaid credit card.

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