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Pre-Paid Credit Cards
Even though prepaid credit cards
function and seem just like debit credit cards, there is a major
difference between both in the sense that while debit credit
cards draw funds from a bank’s checking account, prepaid credit
cards draws money that has already been
loaded on to the card .
Prepaid credit cards, also known as prepaid
debit cards, are first and foremost, not credit cards. Rather,
these are cards, which are already pre-loaded by the user. The
user of these cards can determine the credit limit of the card
by pre-loading the prepaid credit card with the amount of cash
that he/she is prepared to spend. They are however called credit
cards because of the fact that they are accepted everywhere that
credit cards are.
The issuer of these cards provides the user
the facility to carry around a bank account to which all
purchases can be charged without actually having a bank account.
Another major advantage of prepaid credit cards is that they
help avoid debt, due to the absence of both credit purchases as
well as interest charges which generally accumulate on credit
cards.
Thus, prepaid credit cards are a very good
option for people with bad credit, compulsive spenders or people
who mismanage their payments since there is no risk of running
up any debt while making saving and budgeting easier.
Prepaid credit cards took off in the 1990’s
when major credit card companies realised that there was a
significant portion of the US population which could not qualify
for a credit card. It was to capitalize on these consumers, who
could form a sizable business for these credit card companies
that secure credit cards were introduced. Later on, the same
gave way to prepaid credit cards where funds are loaded on to a
Master or Visa card through merchant locations or online banks.
The credit line for prepaid credit card is set at the amount
deposited and keeps coming down with the value of purchases.
Therefore, prepaid credit cards are just a means of converting
hard cash into electronic currency which can be accessed via
plastic cards.
Even though prepaid credit cards function
and seem just like debit credit cards, there is a major
difference between both in the sense that while debit credit
cards draw funds from a bank’s checking account, prepaid credit
cards draws money that has already been
loaded on to the card .Unlike debit credit cards, prepaid credit
cards also do not require the use of a PIN for commercial
transactions.
Some of the main
advantages of a prepaid credit card are:
- a prepaid
credit card is widely accepted worldwide, with MasterCard
and Visa merchant acceptance
- is safe
and convenient to carry
- the user
does not have to worry about debt or overdue credit card
payments
- can be
reloaded with any amount of money over the phone, at ATMs or
even online.
The only disadvantage is that the holder does not have any
credit to fall back on, but then, this is the reason why
anyone would want to get a
prepaid credit cards in the first place.
Credit Cards News:
Live Search: credit cards site:msnbc.msn.com
Search results
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