Prepaid credit cards can be a useful financial tool for consumers because they are more convenient than cash and limited to the amount loaded on the card.
Why a prepaid card?
While some people might assume a prepaid credit card is a good option only for those who have no other choices, that's not the case at all. For example, they are popular with students and consumers who want to hard cap their spending. They are also great tools for teens who want the easy use of a credit card but have parents who don't want huge bills. What is important is to be aware of are the fees associated with the cards.
Bad credit or no credit - A prepaid credit card gives users unable to obtain standard credit virtually all the same options as a person holding a traditional credit card. The primary exception is that a prepaid card can't carry a balance.
Teens and young adults - Want to keep spending in line with resources for people who are just starting out? With a prepaid credit card, they get to use it just like a full credit card but without anyone worrying about a big debt balance. If the card is out of money, it's out of money. Users cannot spend more than they have.
Don't use a bank - Consumers who either can't or don't wish to use a bank can get most of the same features, including direct deposit, on a prepaid card as they can on a bank account.
Avoiding excessive fees
Make sure to look at several options before choosing a card instead of just going for the first card you see advertised. While celebrity endorsements on cards might seem flashy, they usually have higher fees. Consider what the use patterns will be. Users anticipating frequent ATM withdrawals do well choosing a card that has a small monthly fee but offers free withdrawals.
The key points to remember when choosing prepaid credit cards start with understanding the fee calculations. Match these calculations with expected spending patterns, and the cards can be a good choices.
