Consumers are becoming weary of debt – many simply don’t want to own a credit card and take the chance of making an impulse purchase. And yet, in some instances plastic is necessary. Shopping on line, for instance, generally requires a credit card. For them, a pre-paid card is the answer to shopping, but controlling spending.
A pre-paid card’s limit is set by the amount of funds you’ve deposited, just like a checking account. So why not simply use a debit card tied to a checking account when shopping on line?
Some consumers simply don’t want to own a checking account. They’ve had troubles stemming from account mis-management and don’t want to take the chance of bounced check fees, overdraft fees, etc. Some of those consumers are not even able to obtain a checking account due to past troubles that have destroyed their credit ratings.
Their only choices are cash or a pre-paid credit card. Since many retailers and even utility companies will now accept credit cards on line for payment, the pre-paid card is a convenience for bill-paying. Going on line is much easier than buying and mailing money orders, and the on-line receipt offers assurance that the bill was paid.
Who else benefits from using pre-paid credit cards?
Employees whose employers are now making a direct deposit to employee credit cards rather than issuing checks.
Gift givers who want to give their loved ones the option of choice that’s absent when giving a gift card from a specific store.
Parents who supply funds to children away at school via deposits to their pre-paid credit cards.
Government agencies that seek to control fraud and reduce costs while distributing benefits to recipients in welfare and food stamp programs.
Travelers who prefer the convenience of a card over cash, but who don’t want to use their credit cards to an extent that would damage their credit scores.
Employers who provide per diem travel expenses to employees on the road.
As with any other credit card, shop and compare offerings before choosing. Each pre-paid credit card issuer has its own rules and policies. Thus you could find a vast difference in both the number and cost of fees from one card to another.
You might find fees for:
• Application
• Activation
• Annual maintenance
• Monthly maintenance
• Each Transaction
• Balance Inquiries
• Statements
• Customer service calls
Also similar to other credit and debit cards – you could be subject to “holds” if you use the card for gasoline, car rentals, or hotel reservations.
Author:Marte Cliff
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