Prepaid Credit Cards - Why You Need Them And Why You Do Not!

Prepaid Credit Cards are like credit cards except that they can only be used when

the funds have been loaded on the cards by the cardholder themselves prior to usage. So in this sense, they are actually completely different from the traditional credit cards and debit cards which we are used to seeing in day to day life.

Typically, you need to add funds on the card before you can access those funds and most prepaid cards usually have some fees attached to them. Furthermore, they really do not provide any credit whatsoever. So if you are looking for a credit facility or access to additional funds, these cards really are not for you. So with the fees and the costs, it may almost seem that you are borrowing your own money at a cost - so the overriding question would be - why would anyone really need prepaid cards?

- Why You May Benefit From Prepaid Credit Cards

1. Prepaid Credit Cards Provide Access: Not everyone qualifies for credit and debit cards because of their credit history or their social status or because of CCJ's. Prepaid cards can provide such individuals with access to electronic payment devices in the form of prepaid credit cards which thus gives them access to services and purchase options which they would not have normally had access to otherwise. This means that these individuals now have access to online shopping, internet purchases, discounts for electronic purchases and other such offers.

2. Ability to Improve Credit History using Credit Builder and Credit Booster Tools: Whilst this has been quite prevalent with Prepaid Cards in the US, this is something which is becoming more popular in the UK as well. A few prepaid credit card providers now have relationship with credit reporting agencies such as experian and creditexpert and provide features which allow cardholders to build their credit history. Of course, misuse can result in you actually making your credit history worse than it was before.

3. Prepaid Credit Cards Provide Enhanced Security: Prepaid cards usually have lower limits when compared to credit and debit cards and they are not linked to your bank account which means if your card security was comprised, the losses would be limited to the amount that is usually held on the card. So in essence, they do limit your risk and exposure to fraud.

4. Prepaid Cards Can Help With Budgeting: Prepaid Cards can be used as a tool to help teenagers and kids learn to budget and manage their finances responsibly. Also great for avoiding impulse purchases as funds on your card are limited.

5. Prepaid Cards are Great for Travel: Foreign Exchange rates on prepaid travel cards are usually 8-10% better than what you could get on the high street or the airport which means 10% more spend money in your pocket.

- Why You Do NOT Need a Prepaid Credit Card

Well, if you have an excellent credit history and already have access to electronic payment resources such as credit and debit cards, you may decide that prepaid cards is really not for you. Perhaps you are less risk averse than the average individual and given the lack of that need for access, you may just decide that Prepaid Cards simply do not tickle your fancy!

by: Divya Sharma

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