Prepaid credit cards are offered from many of the major credit card suppliers around the world such as Visa and MasterCard. However what does prepaid mean?
Prepaid is exactly what you’d expect it to be with any object. You can look at prepaid credit cards as a sort of gift card for example. Gift cards have money that has already been paid for, so if you buy a £20 card from boots, they have already received their £20 payment which is later spent by the receiver and prepaid cards take this exact format.
To use a prepaid card you must first deposit money into the account and this is how an account is opened, thus meaning your card is never actually in credit.
These type of cards cannot get you in debt, much like any other bank debit or credit card, if there is no balance your card will be declined and your payment unauthorized. Something that draws users away from credit cards is interest rates and the inability to pay back a bill on time and prepaid card eliminate this. Prepaid cards are also perfect for those that have bad credit and can not easily get their hands on regular credit cards.
Qualifying for a prepaid credit card is not hard and there isn’t an age limit of 18 like the original credit card. People with bad credit can apply and be approved as there is no credit checks required. Although you are guaranteed acceptance you still have to prove who you are to address issues such as identity fraud for example. Some suppliers will require you to provide the same documents as a bank; A form of ID and a utility bill or proof of address.
One great function of a prepaid card is how it adds to the management of separate storage of cash along with the ability to add people to the account. If someone is added to an account in most circumstances they will receive their own card meaning you and your partner could share a prepaid card to make sure both of you access to emergency cash if desperately needed.
Prepaid credit cards seem like a great way of managing money and eliminating the need to carry around cash. However it has its advantages and disadvantages that you should be aware of. Before investing be sure of the agreement you are signing and any hidden charges you may be unaware of.