Prepaid Credit Cards

Prepaid credit cards are ideal for a variety of circumstances, for example someone who has no credit history to speak of or if they have a poor credit history. However, technically speaking, they are not really credit cards as funds have to be deposited upfront and can only be used if there are funds in them. Prepaid credit cards are along the same principle as a prepaid mobile phone card and the like and are becoming very popular.

The concept of a prepaid credit card is simply this; you pay money upfront via means of a bank transfer, cash or other means. Details of accepted methods of putting money on the card will differ between the prepaid card providers.

Prepaid cards can be used in the same way that you would use a credit card, so much so that they are frequently referred to as “prepaid credit cards”. The distinction between the two is a prepaid card is wholly determined by your cash and consequently the money you have in your prepaid account is the money you have available to spend.

Another benefit is (aside from any fees) there will be no interest to pay - unlike a credit card. Prepaid cards are very accessible; you will not need to be concerned as regards your credit history being less than satisfactory! As there are no risks to the prepaid card provider, credit checks are not needed.

Fees

Fees payable will depend on each individual prepaid card provider’s terms and conditions and they can vary a great deal.

Most prepaid card providers will charge a card issue fee, a monthly charge fee, some charge “top up” fees, transaction fees, annual renewal fees and ATM fees. The maximum limits permitted to be held on prepaid cards will vary from provider to provider.

You should also take note that some prepaid card providers charge a “non usage” fee if a card has not been used for a certain period of time.

A great advantage of having a prepaid card is that you won’t be able to put yourself into debt unlike you could very easily with a conventional credit card! In addition, you can avoid spending too much due to the maximum fund limits restrictions.

Once you have completed the prepaid card provider’s application and opened an account, you will need to deposit a minimum balance. Then after your account has been set up and running you will then be able to use your card to charge items up to your balance limit.

Disadvantage of prepaid credit cards

If you are on a budget with limited funds, you may find it rather expensive to obtain and maintain a prepaid credit card. Having said that, some people will find that this is a better option than having no other way of paying other than using cash. For example, if you want to purchase something over the Internet or by telephone you will need a cash alternative.

Have a good look around and compare several reputable prepaid credit card providers prior to making a decision. As stated before, the fees and terms and conditions can vary significantly and you want to be able to secure the best deal that you can.