Advantages and Disadvantages of Prepaid Credit Cards

With majority of merchants and establishments accepting credit card payments, it can be very inconvenient and troublesome if you don’t have a credit card. If you’re going on a trip, you need to make most of the reservations from hotels, airlines or car rental companies straight from the internet. So what can you do if you don’t have a credit card?

Some people prefer not to get a credit card until they have built a good credit rating. This is because many credit card companies give their best deals only for customers with good to excellent rating. If you presently have no credit or bad credit history, then you may consider getting a prepaid credit card instead.

Prepaid Credit Cards – How To Use Them

Prepaid credit cards provide all the convenience in payment that a regular credit card provides. You can use it to make a hotel reservation, car rental reservation or purchase an airline ticket online. You can it for buying anything you want from an online store. If you want to shop without carrying cash, you can simply bring your prepaid card with you, and you’re ready to go.

However, unlike a traditional credit card, a prepaid cardholder is not provided with a credit line. This means you can only use your card if you have existing funds in your account. Every time you use your prepaid card for payment, your bills are instantly paid off using the cash deposit in your account. If you have zero cash, then you need to make a new cash deposit to be able to use your card.

Advantages of Prepaid Credit Cards

Prepaid credit cards only charge per transaction so there’s no need to pay for interest rates or late penalty fees. Best of all, anyone who needs a prepaid card is guaranteed to have one regardless of credit rating or employment history. In fact, you can use a prepaid credit card to establish a credit history or rebuild bad credit.

Since a prepaid cardholder is not borrowing against a credit line, the risk of overspending can be avoided. If you don’t have money, you cannot be tempted to buy in an impulse or spend more than you can afford to pay back.

Disadvantages of Prepaid Credit Cards

What about the disadvantages? As we’ve said, prepaid credit cards charge a fee for each transaction you make. To save money, you need to plan your purchases ahead of time to avoid unnecessary transaction charges.

Also, take note that many prepaid cards do report payments to the major credit bureaus. If you want to get a prepaid credit card to build or rebuild credit history, you need to make sure that credit reporting is provided by the prepaid card issuer.

 

Elizabeth Roberts

Elizabeth Roberts

Liz Roberts and her team are continuously providing information to people who are ready to repair their credit and improve their credit score. Also NewHorizon.org team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 24+ years of business finance experience help you to get the financing you need! CONTACT US if need financing for your business.

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NewHorizon.org is an independent, advertising supported website. The owner of the site may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. NewHorizon.org has not reviewed all available credit card offers in the marketplace.

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NewHorizon.org is an independent, advertising supported website. The owner of the site may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. NewHorizon.org has not reviewed all available credit card offers in the marketplace.

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