Updated November 4, 2016 – A prepaid credit card is very similar to a store gift card. A set amount of money is added to a card and then you can spend no more than the amount of money placed on that card. However, unlike store gift cards, a prepaid credit card has a major credit card logo on it, so you can use it at any place of business or online retailer that accepts that type of credit card. Learning about the benefits of this type of card will help you decide if it is ideal for you.
You Can Control Spending
One of the major advantages of a prepaid credit card is that it can be used to control spending. You can only spend the amount of money that is on the card. This means that you can’t go over the amount, even by $0.01. This is a great way for those living on a tight budget to ensure they don’t spend more than they make, or even for parents to control what their teenagers or college-aged students are spending. It is easy to overspend when you have a credit card in your hand, but you take that out of the equation with a prepaid credit card.
You Don’t Have to Have Good Credit
Another major benefit to prepaid credit cards is anyone over the age of 18 can get one. There are no credit checks or ChexSystems checks. If you can’t qualify for a bank account or credit card, this is a great way to get a card so that you can shop online or are not carrying cash around. However, it is important to note that a prepaid credit card will not affect your credit score. Some people have a prepaid credit card confused with a secured credit card. A secured credit card does require a credit check and will help you to build up your credit score. However, it is different than a prepaid card. If you are looking to build your credit up, keep this in mind.
These Are Great Options for Online Shopping
Many consumers worry about using their credit card or bank information when shopping online. If a thief were to get a hold of this information, they could rack up thousands of dollars in debt due to high credit card limits or wipe out someone’s savings in their bank account. If you are weary of using this information when shopping online, a prepaid credit card may be the perfect alternative. You simply place the amount of money on your card that you need to complete your transaction and that is it. If the credit card number falls into the wrong hands, there is no remaining money on your card, so nothing negative will happen.
Easy to Deposit Money
The last benefit to prepaid credit cards is that you easily deposit money onto them. Some cards have a routing number that allows you to have your work checks deposited directly on the card, or allow you or others to transfer money from a bank to the card. You can typically deposit money onto the card online using a debit card or credit card. And lastly, you can deposit money onto the card at various retail locations, based on which retailers sell which cards.
There are a number of reasons why you may be thinking about getting a prepaid credit card. Learning the benefits of a prepaid card will help you make an educated and informed decision as to whether it is right for you.