Prepaid Credit Card As A Substitute For Credit Card

Prepaid credit cards or debit cards are enjoying huge popularity these days. Most people see these cards as better substitutes to credit cards primarily because the application process is simple and quick. Those who cannot get approved for a credit card because of a low score or a bad credit history can easily obtain a prepaid card any time.

Have you thought about getting a prepaid credit card too? If so, read the rest of this article to learn more about the advantages and disadvantage of prepaid cards.

Prepaid Credit Cards vs. Credit Cards

The biggest difference is the fact that prepaid cardholders are not provided with a credit line. A prepaid cardholder can only spend the money he/she deposited in the account. When the balance runs out, a prepaid cardholder must reload or deposit new funds to the account before the card can be used for payment.

Needless to say, purchases paid with a prepaid card are instantly settled so there’s no need to worry about repayment. Prepaid cardholders cannot make purchases in advance and pay for the charges later. Hence, some people refer to prepaid credit cards as electronic wallets since you cannot spend what you do not have.

While not having a credit line can be a drawback, it can also turn out to be a good thing because you can keep your spending in control. Of course, self-discipline is still necessary because no one will stop you from reloading your debit account so you can use your prepaid credit card on new purchases.

Prepaid Debit Cards and Costs

Prepaid credit cardholders are not subjected to interest rate fees which is another positive factor. Nevertheless, using a prepaid credit card does not completely exempt you from paying the fees. In fact, choosing the wrong prepaid card can prove to be a burden because of the high fees and penalties you may incur.

Let’s take for instance, the reloading fees. Most prepaid debit card issuers won’t charge a fee if you will transfer funds directly from your bank account. However, if you’re going to reload through a money transfer service, you may incur a fee which can be anywhere from $3.95 to $4.95 for every transaction. Imagine paying this extra cost in order for you to deposit more funds to your prepaid card.

What about the maintenance costs? Some prepaid cards do not carry an annual fee but the monthly fees can prove to be steep. Monthly fees can range from $3 to as much as $15 which means you would have paid your issuer $36 to $180 in 12 months. Other cards will charge both an annual fee and a monthly fee to keep the account active.

Clearly, it’s important to compare prepaid debit cards and choose one with a minimal and reasonable set of fees. Prepaid cards can be an alternative to a regular credit card but only if you will not subjected to pay extremely high fees that can rip off your budget.

About the Author
Tara Tiemann is the credit specialist for  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!

About Liz Roberts

Liz Roberts is the new credit specialist for Go-Prepaid. If you are on a budget, we can get you discounted cell phone service from Sprint, Verizon and T-Mobile! NO CREDIT CHECK ! Using a prepaid services can save you a TON of money! Follow our blog to find out how!

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