Prepaid Credit Cards – Pros and Cons

Prepaid credit cards or junior credit cards can be effectively used for purchasing, but they cannot be treated as credit cards as it is not possible to avail credit by using these cards. This article tells you in detail about the following

  • What are prepaid credit cards and what is the principle behind it?
  • What are the benefits of these cards?
  • What are the major drawbacks of these cards?

Prepaid credit cards are also known as debit cards or sometimes as junior credit cards. This type of credit card offers many of the shopping advantages of regular credit cards. However, it is not truly a credit card because you cannot get credit. Instead, this type of credit card only allows you to spend money that you have placed on an account.

How Do Prepaid Debit-Style Credit Cards Work?

When you apply for a prepaid credit card, your income and your credit rating are not considered. Instead, you contact a credit card company or your bank and add money to your card. Then, you activate your card just as you would a regular credit card. Once you have done this, you can start using your debit card just as you would your credit card. In fact, there is no way to tell by looking at a card whether the card is prepaid or not. As with regular cards, you can use your prepaid credit card online, on the telephone, or in person.

Each time you make a purchase with your card, the amount of your purchase will be deducted from your total balance. To spend more money, you can simply add more money to your account.

There are several types of prepaid credit cards, including traditional cards, youth cards, and gift cards.

  • Traditional prepaid cards can be used by almost any user. Special student or teen cards are designed for younger card users.
  • A teen card can be a convenient and safe way to provide an allowance and it can give children the money-management skills they need later in life.
  • Gift cards work much the same as gift certificates, but can be used at any participating merchant. They are ideal for travel and for holiday gifts.

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