Benefits of Prepaid Vs Traditional Credit Card

See the pros and cons of prepaid credit cards to find out if this solution works for you.

11:29 16 April 2013

If you are a little leery of a credit card, there’s a beneficial alternative. Prepaid credit cards allow you to make purchase at places which require credit cards, such as hotels, and may also report financial payments and responsibility to assist your credit score. This depends on the type of prepaid credit card you get and whether it is a “secured” card or a simply “prepaid” card which can be purchased in certain shops.

 

The benefits of prepaid credit cards:

 

• No risk for spending more than you budgeted
• No risk of an over-the-limit fee
• Traditional prepaid credit cards eliminate the possibility for late fees
• Allows you to use just like a credit card for most vendors
• Allows you pay bills online in most cases
• Allows you to shop online which may mean savings on many purchases
• No worrying about payments unless you want to refill the card
• No grace periods necessary
• No interest charges

 

Each prepaid credit card may be a little bit different than the next, so it’s important to read the fine print, or the insert that you receive with the purchase of a card. Here are a few things you may encounter.

 

In fine print for prepaid credit cards:

 

• One-time fee to cover the cost of the card itself

• Monthly fee if funds are not used within the first month

• Percentages of purchases may be deduced from your balance depending on retailer

• May require regular deposit to avoid a monthly fee unless the balance is zero, or below a specific amount

 

In short, there are many benefits to prepaid credit cards as long as you are aware of the specific quirks of the card you have. As long as you are aware about that, you’ll be able to manage your card to maximize your funds. These are ideal for gifts, or short term spending money to help you stay within a budget.