The advantages and disadvantages
of prepaid credit cards
Can't have a credit card because of your credit history - not nowadays
How To Get A Credit Card Even With Past
Credit Problems by:
Carmin Olivier
The following article covers a topic that has
recently moved to center stage, least it seems that way. If you've been thinking
you need to know more about it, here's your opportunity.
Do you need a prepaid credit card?
Not everyone can qualify for a credit card. With past credit problems such as
bankruptcies, repossessions, or even divorces, some people do not meet the stringent
qualifications set forth by credit companies to receive a line of credit. However,
there is a way to get your foot in the credit doorway without the best credit
history: a prepaid credit card.
How does a prepaid credit card work?
Whether making a last-minute utility payment, completing an online purchase,
or reserving a rental car, you can use a prepaid credit card just as you would
a standard credit card. Many lenders offer prepaid MasterCard or Visa cards
that look exactly like the regular cards. Neither you nor the store clerk will
be able to tell the difference.
The concept of prepaid credit cards is really very simple. You open an account
and "pre-load" the card with cash up-front, similar to a pre-paid calling card.
Then you use your prepaid MasterCard or Visa anywhere these cards are accepted.
To receive a card, fill out the lender’s application and open an account. You
are required to deposit a minimum balance to begin your line of credit. After
your account is established, you can use your card to charge items up to your
balance limit.
Now that we've covered those aspects of credit card, prepaid credit card, credit
card payment, let's turn to some of the other factors that need to be considered.
Advantages of prepaid credit cards:
- A prepaid credit card is easy to get. It requires no other qualifications
other than your down payment. The cards are available online and at several
retail stores.
- Your credit limit is completely under your control. You can have as high
a limit as you wish, as long as you deposit the cash to meet it.
- With the prepaid card, there are no interest charges or annual fees.
- When you use your card, you aren’t accumulating any more debt. In fact,
by making your credit card payment on time, you are actually improving your
credit rating.
- You can use your prepaid card anywhere they accept MasterCard or Visa
cards.
Disadvantages of prepaid credit cards:
- Prepaid cards can be expensive to establish. A set-up fee of $5 to $50
is charged when you make your opening deposit, and an additional fee is charged
every time you add more money to your account. These fees, on top of the money
you have to put up to get the card in the first place, can be prohibitive
to someone on a tight budget.
- With a standard credit card, you wouldn’t be charged a set-up fee or an
annual fee. Although, the interest you would be charged on your credit card
payment would make up for this in the long run.
- The money you put down in the beginning is often a big deterrent to people
in need of a line of credit. However, if you tend to spend over your credit
limit, this system of only purchasing what you can afford may be a good way
to retrain your spending habits.
- Some service providers will not accept prepaid cards for automatic payments.
Check with customer service departments before you make plans to pay with
your new card.
Conclusion
A prepaid credit card can be an excellent solution if you have had past credit
problems or have difficulty getting a regular card for some reason. But it’s
vital that you practice good financial habits along with owning the card.
Make your credit card payment on time and in full. Manage your money with a
budget and start a small savings account for emergencies. If you use your prepaid
card and pay it regularly, you will eventually offset some of the mistakes you
made in your financial past.
About the author
Carmin Olivier is the webmaster of
http://www.findyourcreditcards.com where you can find "The Best US Credit
Card Deal on the Internet! If You're Looking for Good Credit Card Deal visit
http://www.findyourcreditcards.co
Article Source: www.isnare.com
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