Using Prepaid Credit Cards: The Pros and Cons
In today’s world, credit is the basis of our purchasing power. Whether you are transacting business over the Internet or any brick-and-mortar establishment, a credit card is an almost indispensable purchasing tool.
However, a person with a poor credit history will find it difficult to secure a credit card or renew a credit card. If you are in this situation, a card credit prepaid secured card is the ideal solution. There are MasterCard and Visa prepaid credit cards available and you can use these prepaid credit cards the same way you would use regular credit cards.
When you open a prepaid credit card account, you will need to “pre-load” your card with cash. This process is similar to loading a pre-paid phone card. You can use a MasterCard and Visa prepaid credit card wherever cards with the MasterCard or Visa logos are accepted.
Advantages of a Prepaid Credit Card
- You can easily obtain a prepaid credit card either by buying it online or from a local retail store. There are no credit checks when applying for a prepaid credit card nor do you have to show proof of income. All you need to do is complete the prepaid credit card application, pay the set up fee and load your account with cash. If you load an initial amount of $200, that amount is your “credit limit.” You can add more funds to your account and however much you have in your account becomes your credit limit.
- You don’t pay any interest charges when you use your MasterCard or Visa prepaid credit card to pay for transactions. You are paying for goods or services with actual money; the amount is automatically deducted from your account in real time, thus there are no interest charges applied on your transactions.
- With a prepaid credit card, you avoid financial or credit problems that are associated with regular credit cards.
- You can use your prepaid credit card wherever cards with the MasterCard and Visa logo are accepted. This means you can use your MasterCard or Visa prepaid credit card practically wherever you are in the world.
Disadvantages of a Prepaid Credit Card
- When you apply for a prepaid credit card, you will have to pay a set up fee, which can cost from $5 to $50.
- Each time you load cash into your prepaid credit card account, you will have to pay a transaction fee of $5 or more.
- You cannot use your prepaid credit card to pay for purchases if you do not have cash in your prepaid credit card account. For some, this disadvantage is actually an advantage because it can help avoid compulsive spending.
- You cannot use your prepaid credit card to pay for regular payments like monthly electricity bills or online services.
The Verdict
Like all other things in life, the prepaid credit card has both advantages and disadvantages. A prepaid credit card is a useful thing to have, especially if you have a poor credit history. So when choosing a prepaid credit card, compare the rates and choose the one that is best for your situation.
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