Prepaid Debit Cards: Benefits and Drawbacks
Pros and Cons of Prepaid Debit Cards
In a world where a person almost can’t survive without some form of plastic in their wallet, prepaid debit cards can be both a blessing and a curse. Navigating the pros and cons of prepaid credit cards can be quite tricky. To make it easier, we’re highlighting some of the top positive and negative aspects of prepaid debit cards.
Good Credit Not Needed
One of the best things about prepaid debit cards is that good credit is not needed in order to obtain one. A prepaid debit card is a great way of having a Visa or MasterCard logo in your wallet if you find that your credit has seen better days.
Use Them Everywhere Credit Cards Are Accepted
Another benefit of prepaid credit cards is that you can use them anywhere credit cards are accepted. Whether you want to rent a car or book a hotel room, prepaid debit cards may be the answer you’re looking for if you don’t have traditional credit cards available.
Beware of Fees
One of the drawbacks of prepaid debit cards is that some of them have fees associated with their use. When buying prepaid debit cards, make sure that you completely understand the fee structure and that there are no hidden fees in conjunction with the use or the non use of the card.
It’s Not Reported
Another bad thing about prepaid debit cards is that they won’t help you build or establish your credit rating. Prepaid debit cards are not reported to the credit bureaus, so they do not have any effect on your credit.
Comments
This is a good Article outlining the pros and cons of prepaid credit cards.
However, naturally I think the positive aspects outweigh the negative for prepaid cards.
This is because the card helps people to manage their finances better because like pay as you go mobile phones, with pre paid credit cards you cannot spend what you don't have.
As you suggested, for many people, having a credit card is essential for either everyday use, for travelling, etc. However, the temptation for many credit card holders is to spend money which isn't really theirs.
I know from personal experience when I went to University and I got my first credit card that merely because the temptation was there, I ended up spending far more than I could afford to. However, I did need the credit card because I was doing a lot of travelling and lets face it, debit cards aren't accepted widely enough.
Prepaid credit cards give the security and freedom of a normal Mastercard, Visa etc. but without the temptation to overspend because if the money isn't on the card you can't spend it.
Its for this reason that pay as you go mobile phones are so popular. People become more aware of how much they are spending. This makes such products ideal for parents to give to their children (above 13 only of course) to teach them valuable lessons about money, whilst being safe in the knowledge that their child can always have access to funds and is carrying around their money in a safer manner than cash in the pocket.
Of course the monthly fee structure is a small downside, but for the best prepaid cards this fee is only about 5-6 pounds which is far lower than how much the interest would cost for the average credit card holder.
Posted by: Pay As You Go Debit Cards | August 1, 2007 6:10 AM