When credit card companies realized that a large portion of the United States population did not qualify for their credit cards, prepaid cards were introduced. This type of credit card functions just like a prepaid phone card, and requires the holder to load funds directly onto it. The cardholder can only spend or withdraw the exact amount put onto the card.

Advantages of Prepaid Credit Cards

One of the major advantages of a prepaid credit card is everyone over the age of 18 is eligible for one, regardless of their credit history or score. The cards have worldwide functionality, thanks to MasterCard and Visa merchant acceptance. The safety aspect is also an advantage; after all, carrying a card is much easier than carrying the equivalent in cash.

Disadvantages of Prepaid Credit Cards

The disadvantages include not having the luxury of spending the bank’s money, if you do not have funds to load the prepaid card it will stay empty. The notification requirements for a stolen prepaid card are much stricter than for an average credit card. You may also wait longer for a fraudulent use claim to be cleared. Some prepaid cards charge a small monthly fee, as well as a larger annual fee. It is also not unusual for prepaid cards to charge you for withdrawals at ATMs. Make sure you ask for a copy of all charges relating to your prepaid credit card before you commit, as fees do vary quite significantly.

Travel

If you enjoy traveling regularly than a prepaid credit card may be a smart alternative to travelers’ checks. A prepaid card can also help you avoid complicated exchange rates if you like to travel internationally. Regardless of whether you have an international or national bank you will be able to use an ATM to withdraw money all over the world. If you need to top up your card, you simply take it to a participating bank and reload it.

Additional Considerations for Prepaid Credit Cards

Unfortunately, prepaid credit cards cannot be used for automatic monthly billing or payments. They can also make keeping up with your spending more troublesome than if you were dealing with the cash. However, the advantages of a prepaid credit card do seem to outweigh the disadvantages, especially as they can also help you budget your money more responsibly. Because there is no background or credit check, it will not leave a negative mark on your credit history.