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[A83]A Prepaid Credit Card

by Jon Francis, Jon

When is a credit card not really a credit card?
Prepaid credit cards can give you many of the advantages of a credit card without the danger of getting seriously over your head in debt. A prepaid option is essentially a debit card that's not attached to a bank account. Instead, you 'load' the card by sending money to the issuing company (or paying at a merchant to have the money credited to your account). Then you can use the prepaid card just the way you would any other credit card to make purchases at the register, over the telephone or on the internet. Each time you make a purchase, the amount is deducted from your remaining balance. You can usually add money to your account at any time, though there's often a minimum and a maximum amount you can add at one time.

Why would you use a prepaid credit card?
In a word, convenience. It allows you the convenience of making purchases without cash and is accepted at any merchant that accepts credit cards with the same emblem. In other words, if you have a Visa card, any merchant that accepts Visa cards will accept your prepaid card. The one major exception to that rule is those services that set up a monthly debit from your credit card ? subscription services. Since the acceptance of the charge from any company is dependent on your paying money into the card account, a merchant can't be certain that the money will be there when they debit it.

It is also an excellent way to teach children and teens to handle credit responsibly. Many young adults get into trouble when they get their first credit card because of the novelty of being able to pay for things without money. If you get them into the habit of handling plastic in the same way that they handle cash ? you only have so much of it ? they'll be far more likely to shop carefully and handle credit as if it were real money than if their first experience is with a credit card that can spiral them into debt.

Among the many options that you can see at moneyeverything.com are prepaid credit cards from major UK providers. As always, it's important to compare rates and fees. While APR isn't a concern with prepaid credit cards, there are variances in fees charged just as there are with other credit cards. You'll pay a fee each time that you add cash to balance, for instance, and that fee varies from one provider to the next. Some will charge you for any billing questions that you might have, or for providing customer service calls. If you use your prepaid credit card as a debit card to get cash from an ATM, you may pay a fee to issuing company as well as to the ATM's bank.

You won't, however, have to worry about paying monthly bills, or about the interest rates charged if you carry a positive balance. Since the only money that's ever available to you is the money that you add to the card, you won't be running up your bills. You'll only be making it safer and more convenient to carry your money with you.
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There are a lot of benefits to a prepaid credit card, as well as many different applications for the technology. The most obvious benefit is that you can't go over your limit. There is no such thing as over drafting from an account. When the account is empty, you simply cannot use the card. You have to refill it before any more purchases can be made. This is very good for people who have poor credit history or impulsive spending habits. It can help people avoid debt and be a good first step in rebuilding a low credit score.

These cards are also good for teenagers whose parents may want a middle step before getting a full service card for their children. Parents can fill the card with an allowance (or teens can put summer job paychecks into the card) whenever they want to, and junior gets to enjoy the freedom and security of credit card spending. Purchases can also be monitored with this system, which can help a teen increase his financial savvy. By seeing exactly where his or her money is going, they will be more likely to develop good habits they can keep throughout their adult life. An added bonus is that these cards frequently look the same as full-service cards, which enables teenager to keep their pride intact when the go out with their friends.

Pre-paid credit cards are also being used for specific situations. Most prevalent is the Visa Gift Card, which can be bought in any denomination and given as a gift. Recipients can spend the money anywhere, any way they wish. Another specific application is Visa's Travel Money Card. It can be loaded directly from an ATM with funds from a checking or savings account, and then carried in place of cash or travelers checks. It is also covered under Visa's Zero Liability Plan, which protects it against fraudulent purchases, card theft, and identity theft.

A third application that is growing in popularity is the payroll card. The payroll card is a great way for companies to reduce payroll costs and help the environment. A payroll card can be given to every employee of a business and then at the end of the pay period employees receive a direct deposit of the funds they have earned. This is available immediately upon deposit, which saves the employee the time it would take to go to the bank, wait in line, pay a cashing fee, etc. It also saves the company the time and money it takes to print and mail paychecks. Employees who may not have a bank account can take advantage of the system as well. Since all funds are deposited into the card account, there is no need for separate checking or savings accounts.

There are a few downsides to the prepaid card. Most cards require a start-up fee, and while for many companies this fee is minimal, some of them are substantial. Another downside is that many businesses that accept automatic payments from bank or credit card accounts will not accept them from prepaid cards. For most consumers this is a minimal annoyance, but for some it can be a significant setback. As with a normal credit account, when selecting a prepaid card it is best to research your options and make an informed decision on the best card to meet your individual needs.

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Both Jon Francis & Debbie Dragon are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Jon Francis has sinced written about articles on various topics from Credit Cards, Credit Cards Benefits and Credit Cards. Jon Francis has been involved in various areas with the world of finance and has a keen eye for a bargin! He has an in-depth knowledge of the mar. Jon Francis's top article generates over 90500 views. to your Favourites.

Debbie Dragon has sinced written about articles on various topics from Finances, Credit Cards and Kitchen Home Improvement. This article has been provided courtesy of Creditor Web. Creditor Web offers great available for reprint and other tools to hel. Debbie Dragon's top article generates over 165000 views. to your Favourites.