For those that don’t want to go with a traditional credit card, or a secured card, but still want the convenience that a credit card has to offer, prepaid credit cards offer that opportunity. You can still use them to pay your bills, withdraw money, and make purchases.
How Prepaid Credit Cards Work
A common misconception is that these types of cards are the same as secured credit cards. However, this is not the case. While the functionality is similar, it is still a little bit different.
The way that these types of cards work is actually quite simple. You purchase the card and add funds to it (at a participating retailer and sometimes it can be done online). The funds that you deposit onto your card is what you’ll be able to spend.
Keep in mind that with prepaid credit cards, you may have to pay a monthly service charge and/or pay an extra fee every time that you want to reload it. Other than that, it’s a great way to be able to embrace direct deposit and a more convenient approach to paying for things.
The Benefits of Prepaid Cards
As always, we like to dig into the benefits of the options that are available so our readers can decide whether it’s the best solution for them or not. In terms of prepaid card benefits, here they are.
· A higher level of accountability can be embraced.
With credit cards, all of your transactions will be stored within the transaction history of your account which means that you can easily track where your money goes. You’ll also be able to keep tabs on how much money you’ve deposited to the card over time.
· It provides you with a secure way to put cash away.
Just like with secured credits cards and traditional credit cards, companies offered the prepaid approach are still insured by the FDIC. Not to mention, if your card gets lost or stolen you can easily place a freeze on it until you get a new card in the mail.
· You don’t have to worry about a credit check.
Unlike the other types of credit cards, you won’t have to get credit approval since you’ll only be able to spend the funds that you’ve already added to the card. While it may be called a credit card, it’s important to keep in mind that your payments won’t be reported to the credit bureaus.
This is often a great solution for those who might not get approved for the other types of credit cards, and it’s also a great gift when you want to let someone spend the money on something you know they need or want. With so many prepaid cards on the market, make sure the one you choose truly fulfills your needs as each one comes with its own approach to things.