A lot of people have decided to purchase prepaid credit cards given that traditional charge cards have come to be known as huge financial risks-causing people to have more debt than income. Prepaid cards have come to be known as the "secured" charge cards that compel their owners to be more financially aware and responsible. But what exactly are prepaid cards?
An Overview of Prepaid Cards
Prepaid cards are basically financial entities which you can use in place of cash – to purchase goods or pay for services. Although people usually categorize them under credit cards, these cards do not actually work like the traditional charge cards that you can use in a "spend now, pay later" scheme. Prepaid cards actually work the other way around. They require you to load them with cash first before you can actually use them-much like a "pay now, spend later" scheme. Are you quite confused?
Well basically, you deposit cash into your card's account; and the amount of money that you have deposited will exactly be the same amount of money you can spend using your card. Although this may sound quite restrictive, a lot of people who have experienced the consequences of having the liberty to overspend find this arrangement actually helpful. So, what are the main reasons why people get prepaid cards?
Reasons Why People Purchase Prepaid Credit Cards
1. It is safer to carry around than cash.
2. It does not require meticulous credit checks.
3. It lets you take control of your finances and gives no room for overspending.
4. It has no overdraft or interest fees.
5. It is easy to obtain and easy to use.
6. It is not attached with the responsibility of having to pay for credit card bills at the end of each month.
7. It can be used for online transactions.
8. Some cards may be used to build credit history.
Reasons Why People Don't Want to Purchase Prepaid Credit Cards
1. Its buying capacity is limited.
2. It may not be used to pay for some transactions-like monthly subscriptions wherein a certain amount is to be deducted to the card per month.
3. It cannot be used unless you put cash in it.
Prepaid cards are a good solution for people who want to enjoy the convenience of the traditional credit card but do not want all the financial risks that come with owning one. Or, it may be an alternative to anyone who is having troubles being approved for a credit card. In today's society, where cashless transactions are becoming more and more prevalent, it is important to be able to fit in. So to enjoy both convenience and financial security, it may be wise to purchase prepaid credit cards.