The Pros And Cons Of Prepaid Credit Cards

Observers in the lending industry have estimated thatATM machines. When you need to reload and you
there may be at least 50 million Americans who areare already traveling you can arrange for the reload
not able to qualify for credit. These consumers areby phone or online. Apart from the fact that it is a
usually young, often members of the minority groupsprepaid credit card, you can use it exactly like a
and unbanked...and they are faced with theregular credit card. That also means you enjoy other
long-standing dilemma of credit: how can I build mybenefits just like a regular card - reimbursements for
credit record if no one will give me any credit at all?lost luggage of up to $1,000 per cardholder if your
One of the answers offered by credit cardluggage is lost; zero liability if your prepaid credit card
companies is a variety of prepaid credit cards,is used fraudulently after you lose it or have it stolen
designed for use by specific segments in the market.from you; purchase security up to $500 per claim for
The prepaid credit cards are meant for thatany items you buy with prepaid credit cards, which
significant portion of the population that cannot meetsubsequently gets stolen or damaged for certain
the qualification criteria for regular credit cards, orreasons.
who qualified before but have since lost their creditGenerally, you can purchase prepaid credit cards of all
due to repeated defaults and other reasons.the major credit card brands at their participating
Advantages of Prepaid Credit Cards For those whoretailers. You don't have to worry about not having
do not have enough credit history or have had itacceptable credit because prepaid credit cards are
blemished, prepaid credit cards are an effective waymade available without need of a credit report or a
to build or slowly rebuild credit. That may not happenbank account. The only qualifications you need to
immediately, but it is something to work on overhave are that you have reached 18 years of age and
time. The banks that issue prepaid credit cards arethat you must be able to present a valid identification
also prepared to extend normal credit the momentissued by government.
you are able to show that you have become aDisadvantages of Prepaid Credit Cards
worthy credit risk.There are a few things about prepaid credit cards
For the moment, you may have to make do withthat may not be as convenient as the regular credit
prepaid credit cards. You can use prepaid credit cardscards. For one thing, you load only so much money
as you would any other regular credit card toonto it. You will need to keep track of the balance
purchase airline tickets, reserve hotel rooms, or orderon the prepaid credit card because not all of the
items online.merchant terminals where you use the card may be
Prepaid Credit Card for Studentsable to help you determine it. However, there are
There is a special prepaid Visa credit card forprocedures that tell you how to determine your
students, which offers a lot of convenience not onlybalance, and you will these detailed on the back of
for the students but also for their parents. Thesethe prepaid credit card and in the instructions
reloadable prepaid credit cards offer parents severalaccompanying it.
options on how to reload. Parents can add money toThe process of reloading your prepaid credit card
reloadable prepaid credit cards by depositing money,may be a little inconvenient to some. If you're using
by arranging an automatic transfer of funds fromcash, you would have to visit the participating outlet
their account (a deposit account or their own creditwhere you bought your reloadable prepaid credit
card account), or by online transfer. Using the prepaidcards. The more convenient way will be reloading
Visa credit card is no different from giving the regularonline.
allowance to their child, only they do so by electronicThere are also the charges. Prepaid credit cards
means and there is no more cash that changesimpose an application fee, the amount of which
hands.varies with the issuer, and there is also a service
The big advantage of the prepaid Visa credit card ischarge that you have to pay monthly. You also have
that the student is limited to spend only as muchto pay for transaction fees, charges when you
money as there is in the card. The parent is thus abletransfer funds to top up the balance, when you
to control to some extent the spending behavior ofreplace your prepaid credit card, and many other
their child. They can use the prepaid credit cardfees. To be sure about the fees, you should read
anywhere that the credit card brand is accepted.closely the fine print on the prepaid credit card
Prepaid Credit Cards as Gift Certificatesaccount.
Some prepaid credit cards function like giftProspects of Prepaid Credit Cards
certificates. You buy the prepaid credit card for aPrepaid credit cards do not provide credit; it is your
certain amount, and your recipient can purchasemoney that you're using. You are asked to pay other
items with it at any of the brick-and-mortar stores orcharges, so it is not for free. You are paying for the
online merchants, and also for mail order items, thatconvenience and security of carrying plastic instead
accept the particular credit card brand. Your recipientof large amounts of cash. People with bad credit will
can use the prepaid credit card only up to thebe able to act as if they had a regular credit card and
amount of money that you loaded on it. Thisenjoy the convenience of one.
particular version of prepaid credit cards isIssuers of prepaid credit cards realize that it is a
non-reloadable.good way to monitor the credit behavior of the
Like any gift certificate, recipients of prepaid creditcardholder. A prepaid credit card would be a source
cards can buy whatever it is they want at any timeof information that indicates to the credit bureaus
they want. Unlike a gift certificate that, when it getsand issuing lenders about how you as the individual
lost is lost forever to the recipient, prepaid creditcard-holder use the card to pay your bills such as
cards may be replaced if it gets lost or is stolen.utilities. If these consumer data could be formatted in
Prepaid Credit Cards for Travel There is a prepaidsuch a way as to provide the basis for a statistical
credit card designed for travel. These reloadablemodel on probable future behavior in spending, then
prepaid credit cards can be purchased in lieu ofthis could become the foundation for building a credit
travelers' checks or cash. In a way, it combines thehistory.
best features of a credit card and a traveler's checkYou would benefit, because by using prepaid credit
because of its convenience and security features.cards you are rebuilding your credit. The prepaid
Should you lose the prepaid credit card while you arecredit card issuers would benefit, too, because they
on travel, you can easily obtain an emergencywould be making previously unproven customers
replacement, both for the prepaid credit card andbankable. More people could then qualify for regular
some cash.credit, and that would mean tremendous incremental
Prepaid credit cards for travel are accepted all overrevenue for the lenders.
the world, and also allow you to obtain currency from