Prepaid Credit Cards
Prepaid credit cards, gaining popularity in a market that veers away from cash payments, are sprouting up everywhere from banks and online sites to large chain stores and smaller retail shops. Easy to use and easy to buy are two reasons for the attractiveness that is attached to them.
Prepaid credit cards, available as MasterCards or Visas, are used in exactly the same manner and locations as a traditional credit card. Since the card will carry the consumers name on it, the cashier will not be able to tell that the card has a prepaid limit.
In order to obtain a prepaid credit card, the consumer needs to have readily available cash and complete a very short application. No credit checks are required. Approval generally occurs within a matter of moments.
Once the consumer has been approved, they will preload the card for the limit that they want on the card. The payment can be made with cash or a debit card. If the consumer is purchasing the card online, then a bank account will also be required to secure payment of the preloaded balance.
The features of prepaid credit cards vary according to the supplier. Some companies have a minimum and maximum amount that they will allow to be loaded onto the card. Additionally, certain fees are attached to the different cards. For example, although the card may be used at an ATM, fees will be charged and deducted from the balance of the card.
In general, lost cards can be replaced for a fee. Furthermore, account balances may be closed by using the total amount of the load on purchases, withdrawing the balance of the card at an ATM, or closing the account, which might require a closing fee.
Traditional credit cards do not work for everyone. Individuals with a low threshold for impulsivity have difficulty keeping the balances of their credit cards low. Instead, they purchase items they want but cannot afford, frequently. They run up their credit card debt until they cannot pay their bill in full. In fact, the worst case scenario often creeps up and pops in like the unwanted visitor that it is and the individual begins to have so much difficulty making their monthly payments, they no longer have to worry about paying their balance in full. For this type of individual, the prepaid credit card is a gift of salvation from repossession, foreclosure, and bankruptcy.
Additionally, individuals who have already experienced the woes of living outside their means, no longer have to worry about credit cards, because they cannot even acquire one with their bad credit history. But what if they need a credit card for online purchases, large purchases, or simply to make a purchase somewhere that will not accept cash or check, such as a car rental agency? In fact, many companies will not accept a check without additional proof of identity, which often equates to credit cards and a driver's license. Prepaid credit cards offer the flexibility of a traditional credit card without the inherent risks associated with it.
When someone is trying to control their spending and develop better buying habits and a budget, prepaid credit cards are a terrific option. The amount of spending is limited to the amount of money that has been put on the card. The individual cannot purchase beyond that preset limit. Therefore, no additional fees will accrue such as interest charges on unpaid balances or late fee charges.
It is important for the consumer to read any cardholder agreement that exists on the prepaid credit card. This is the best place to discover the hidden fees that might exist on the card. Some cards may actually have expiration dates, or dates upon which a monthly service fee will be charged against the balance of the card.
Occasionally an overdraft may occur, and then, an overdraft fee may kick into place. Some of these can be quite hefty at $15.00 or $25.00 an occurrence. Generally, however, this does not occur if the store requests preauthorization, because the request will be denied and no overdraft fee will be charged.
Some prepaid card companies will give monthly statements provided a purchase has been made in that month. Other companies allow the cardholder to check the card's balance online. Returning items with a prepaid card is as simple as returning an item with a traditional credit card. The process will follow the guidelines of that particular prepaid card, but generally includes a credit to the card, a store credit, or a cash payback.
Additionally, some prepaid credit cards wave the monthly fee in exchange for a per purchase fee. If the consumer is planning on making multiple purchases each month, the monthly fee may be more worthwhile.