Today, an increasing number of consumers are starting to use prepaid credit cards. In the past, debit cards were used by people who couldn’t get approved for a regular credit card, but wanted the convenience of paying with a card with the Visa or Mastercard logo on it.
When it comes to payment, prepaid cards offer the same convenience as regular credit cards do. Prepaid debit cards are widely accepted by many merchants and establishments particular those that bear the Visa and MasterCard logos. Prepaid cards can be used to purchase online and from brick-and-mortar shops.
The biggest difference between a “real” credit card and a prepaid card is that the latter does not provide a credit line. In order to use a prepaid card for payment, the cardholder must first reload cash or deposit funds into a checking account that is linked to the card. Bills charged to a prepaid card are automatically paid off using the existing cash fund. When the balance runs out, the prepaid cardholder must make a new deposit or reload the card before it can be used for new transactions.
Indeed, prepaid debit cards are considered to be a great alternative to credit cards. Since there is no need to repay charges, a prepaid cardholder does not need to worry about interest rates and late penalty fees. However, owning a prepaid debit card is not exactly without any costs. In fact, some people might be hesitant to use a prepaid debit card because some prepaid cards are known to carry very expensive fees.
Avoid Expensive Prepaid Credit Card Fees
How can you avoid fees associated with prepaid credit cards? First of all, you must begin by searching for the right prepaid card. Before acquiring one, read and understand the fine print. You can easily compare different prepaid cards online by checking out a reliable credit card comparison website. Some prepaid cards require a set-up fee or account activation fee so you need to make sure that this fee is minimal and one-time only.
Don’t forget to check the monthly maintenance fee. How much will you need to pay each month to keep your prepaid account active? Some issuers also impose a penalty fee or inactivity fee if you don’t use your card for a month. Reloading fees can also be a burden since you will be charged with an extra few dollars each time you load cash to your account.
Avoid overdraft charges. Although prepaid debit cardholders can only use their cards for payment if they have an available balance, a transaction may still successfully go through even though there is an insufficient fund in the account. This usually happens when the difference between the balance and the purchase price is relatively small. However, the prepaid cardholder will be charged with an overdraft penalty. The penalty fee will deducted the next time the cardholder reloads the card. To avoid this extra fee, check your balance first before using your prepaid card for payment.
About the Author:
Tara Tiemann is the credit specialist for Go-Prepaid. Which is a resource site for people who want to live debt free! If you are on a budget, using a prepaid credit cards and prepaid debit cards can save you big money!