Prepaid credit cards are essentially debit cards that will help a person build credit. It is generally availed by those who are fearful of credit cards or by those who are unable to secure regular credit cards. There are a few advantages and disadvantages with prepaid credit cards and the passages below will discuss both aspects.
Advantages of prepaid credit cards
Prepaid credit cards are accepted everywhere
You can use prepaid credit cards in any facility that will also accept credit cards. Prepaid credit cards will come with the Visa or Master card logo and will be compatible with all credit card swiping machines. A prepaid credit card is a good option if you do not want to carry around a lot of cash. They are also a very good option for those who are used to paying with checks, but are unable to use checks in certain locations. For example, one will usually have trouble writing out checks once they leave their city or state. This is not the case with prepaid credit cards that will be accepted across the country and in international locations as well.
No interest payments to worry about
Another obvious advantage to prepaid credit cards is that you will not have to pay any interest on the outstanding balance as the money deposited towards the credit card was yours to begin with. So, prepaid credit cards can be a great option for those who do not want to risk getting into debt with credit cards. Another alternative is to simply use debit cards although certain banks still hand out debit cards that will only work in certain locations and certain ATM’s. Some people who are loyal bank customers will prefer to maintain their bank account in the same bank and simply use some of the cash to avail prepaid credit cards that they can reload every time the balance gets lower.
Disadvantages of prepaid credit cards
Embarrassment associated with prepaid credit cards
Though the whole economy is struggling, the general American society has a tendency to look down upon those who avail prepaid services. The general assumption is that all those who apply for prepaid credit cards and prepaid phone connections are either people with a blotchy past or are people with a really bad credit history. Though it is none of their business, bearers of prepaid credit cards will be subject to a different treatment from store clerks and store managers who will automatically assume that they are trying to do something suspicious with a prepaid credit card.
Some usage charges may apply
Another downside to using prepaid credit cards is that one will have to incur some charges such as a monthly usage fee. They might also have to pay fees when they use the ATM to withdraw money from the prepaid credit card account. However, even the regular credit cards will usually charge money when one seeks cash back from their credit card.
Sometimes, prepaid credit cards will allow customers to conveniently load money into their account from an ATM although such a service will require a small additional fee as well.
