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Pre Paid Credit Cards- Great Idea, or Financial Con?

Personal_Finance / Credit Cards & Scoring Jun 17, 2008 - 10:43 PM GMT

By: Mike_Gracia

Personal_Finance Pre paid credit cards are, in a way, like a debit card, in that now actual credit is involved. They differ from debit cards however, because they are accepted pretty much anywhere that accepts the credit card brand (for example, MasterCard)

With pre paid cards like these, the card holder actually pays funds into the card (Loads the card) –and then spends the balance as they would a normal credit card.

What are the good points about pre paid credit cards ?

  • It is usually not possible to get into debt using a prepaid credit card. This is great for those concerned with getting themselves into bad debt.
  • Use abroad – These cards are often available in foreign currencies, making them handy for use abroad. Also, the risk of card fraud is a concern when abroad – at least with a prepaid card, people can only take what is actually on the card, and not run you into bad debt.
  • No need for a credit check to get a pre paid card.
  • Handy for online payments, as it saves you having to expose your real credit card details online!
  • There is no need for a credit check when applying for these cards, this helps keep the number of searches on your credit file down.
  • A way for people that have a very poor credit history to have a credit card, that can be accepted at most places that accept normal credit cards.
  • Instant decision on most cards… most pre paid cards are instant decision credit cards .

Any Disadvantages of Pre Paid Credit Cards?

  • With normal credit cards, you can get incentives, reward points etc… you usually don't with prepaid credit cards .
  • Often pre paid cards cannot be used to hire cars
  • Some suppliers charge a monthly fee for having a pre paid card
  • Often the cost of withdrawing on the card can be high
  • There will only be a limited number of places that you can re-charge the card
  • With some cards it may not be possible to re-load the card abroad

In summary, these cards can be useful, but make sure you know all of the expenses related to the card, and compare different pre paid cards, as they are not all the same!

By Mike Gracia

    © 2007-2008 Copyright Mike Gracia / - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    Mike Gracia Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


18 Jun 08, 08:09
Prepaid Card disadvantages

Your article touched on the con's of prepaid cards and the one that should be highlighted is that of fees.

Many of these cards not only charge a monthly fee but charge a signup fee and then additional fees for things like loading it and then using it.

These charges can end up being significant and one should carefully weigh-up whether it's not better to just use the debit card issued by your bank.

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