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Prepaid credit cardsThis is perhaps a slightly deceiving title as no credit is actually issued with these types of cards, despite them being made available in Visa or Mastercard form. In this case the card holder spends money that has actually been stored at an earlier date, perhaps by themselves, a friend or a relative. Like a secured credit card some card companies let prepaid credit cards help the consumer build up their credit rating. These cards also tend to have much APR’s.The cards are bought and then loaded with an amount of money, (at the card holder’s discretion). They are often issued to teenage children (as there isn’t actually any credit involved), as they can complete transactions without the presence of their parents. Essentially it enables people to shop without carrying money. Advantages Unlike secured credit cards, a set amount of money is not required in order to open the account. Also unlike secured credit cards, you are not actually borrowing any credit and therefore you are not charged interest. Disadvantages There are some disadvantages to prepaid credit cards. To begin with there is often a charge to obtain a prepaid credit card you do effectively have to buy one. As well as this fees are applied monthly after a set period of time and depending on the contract, other fees may also apply. This can result in prepaid credit cards being an expensive way to spend your own money. |
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