How Do Prepaid Credit Cards Work?
Prepaid credit cards may seem like an oxymoron; yet this type of cards do exist. If anything else, this is a great way of teaching younger kids and teenagers the value of using credit cards. For one thing, there is absolutely no danger here of becoming indebted to the credit company for spending too much. For a prepaid credit card holder, the worst that he or she can do is to max out the credit.
On another note, adults can also utilize such credit cards as a way of keeping within the budget. We all know the dangers of freely waving those credit cards in the stores, shops and eating establishments. Since we do not particularly see the actual tally of the money we are spending, we tend to spend more and more and more. The only time that we get a glimpse of our expenditures is when the bills arrive. Coincidentally, this is also the time when we get the biggest headaches per month.
So how do prepaid credit cards work?
Prepaid credit cards can help a person control his or her spending by simply limiting the money they are providing in the card. Conventional credit cards also have limits, but the limits usually exceed the person’s current account. To make this point clearer, here is an example:
Sally has over $200 in her bank account. Her bank then extends her a credit line limit of $500. In other words, Sally has the potential spending capacity of $700. Jane, on the other hand, also has $200 in her bank account, and her bank also affords her a credit line limit of $500. But Jane has opted to use a prepaid credit card instead. She has loaded only $50 unto that card so that she could control her daily spending to a minimum. Jane then has only the potential spending capacity of $50. Jane can also increase that amount by simply loading more money into the prepaid credit card, if she wishes.
Another wonderful thing about prepaid credit cards is the lack of interest fees charged to the prepaid credit cards. We go back to Sally, then. Sally is using her conventional credit card, and this month, she has spent exactly $255. Her interest fee for this month’s transaction costs her another $15. Sally must repay her bank a total of $270.
Jane has currently maxed out her prepaid credit card. Since this is a prepaid account, she does not have to worry about additional charges what-so-ever. Jane’s spending has cost her $50, and only that.
How can I get my own prepaid credit card?
This process is quite simple. If you have a bank account, simply ask your bank to provide you a prepaid credit card (if they have one.) A bank account is important in this regard, although technically, you won’t be using any of the money you have in those accounts.
Just like a pre-paid telephone card or a pre-paid internet card, you need to pay cash upfront for every transaction. If you bank does have this service, you simply go to the teller and pay for the amount you want loaded into your card.
If your bank does not carry this kind of service, your best option is to go online and apply via the web to one or more credit card company. Try Master or the visa gift card, since both these lending institutions are secure; and almost every other establishment accepts their cards.
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