Advantages vs. Disadvantages of Prepaid Credit Cards

Prepaid credit cards are popular for people with bad credit who cannot obtain a regular credit card. The primary difference between a regular credit card and a prepaid one is that you have to deposit the money for aprepaid credit card before you can use it. Other than that, prepaid credit cards work similar to regular credit cards in that you can use the card to make purchases up to the prepaid amount you have left on the card.

Advantages of Prepaid Credit Cards

Prepaid credit cards are much easier to obtain than traditional credit cards because lenders do not require a credit check for you to obtain one. All you have to do is purchase one from a retail outlet that offers these cards. The second advantage of a prepaid credit card is it helps keep your spending under control. You can only spend the amount of cash you have put on the card. Finally, you won’t incur any interest rates or late fees with a prepaid credit card.

Disadvantages of Prepaid Cards

The primary disadvantage of a prepaid credit card is the up-front costs involved in establishing the card. Most prepaid credit cards have a setup fee, which can be as small as $5 or as high as $50. This fee is in addition to the money you load on the card to establish your “credit limit.” In addition, each time you load your prepaid credit card with money, you may pay a transaction fee. The other disadvantage is you have to have the cash up-front in order to load and use your card. Finally, although a prepaid credit card looks similar to a credit card, some companies do not allow you to use prepaid credit cards for automatic payment plans. This means you may not be able to pay your phone or utility bill on the card on a monthly basis.

Tagged with: Business • Credit card • Financial services • Money • Prepaid • Prepaid Credit Card • Retailing • Stored-value card

Filed under: General

Like this post? Subscribe to my RSS feed and get loads more!