Credit cards seem almost essential for modern living. The convenience of being able to buy online, book flights, make reservations and so much more make a credit card something that is really worth having.
However, credit cards can bring their own problems and these are well documented. Some people simply lack the willpower to use credit cards wisely and end up spending way beyond their means. So, while the credit facility can be very convenient, it can also be little dangerous.
Many people who have had problems with credit in the past are not eligible for credit cards because of a bad credit rating, while others steer clear of them so they do not end up overspending. It can also be difficult to get approval on a traditional credit card if you are on a low income, are unemployed or even self employed.
Luckily, if you fall into one of these categories, there is an alternative – pre paid credit cards. These, basically, are credit cards without the credit. They can be used in exactly the same way as standard credit cards but you can only use money that you have lodged to the card account. In many cases, you can not spend more than the amount you lodged so you do not risk falling into debt, you do not pay interest and you do not risk damaging your credit rating.
Perhaps the chief advantage of prepaid credit cards is that they are versatile. They are usually Visa or Mastercard so you can use them at millions of outlets worldwide; you can withdraw cash from ATMs; and you can make purchases online or over the phone. In addition, they are PIN protected so they are secure.
Also bear in mind if that you currently have a bad credit rating, the use of a prepaid credit card can help you repair it, albeit slowly. In some cases, you may be allowed a very small credit limit, say £250, that you can dip into. However, interest rates in the region of 40% APR should ensure that you always keep your card in the black, thereby helping your credit rating.
As mentioned above, prepaid credit cards will not cost you in interest charges. However, the banks have to make their money somewhere so there are other fees and charges to watch out for, and they can be quite high.
As always, it is a good idea to familiarise yourself with any product you are considering and make sure you understand all fees and charges. Some of the main ones to watch out for are application fees; service charges; lodgement fees; and withdrawal fees. Also, prepaid credit cards may not be accepted as security for certain transactions, such as renting a car.
Because of the lack of a credit card facility on many of these cards, the application process is relatively simple and it is often very easy to get approval. Normally, your card will be mailed to you with instructions on how to activate it.
To be able to use your card you will have to deposit or ‘load’ money to the card’s account. This can usually be done online, with a bank transfer or even using another credit card. Ideally, you should be able to load at any time of the day or night, and you should check to see if there are any limits to the amount you can deposit per month.
The prepaid credit card market is becoming increasingly competitive so be sure to shop around for the best deal. Also bear in mind that a debit card will offer many of the same advantages so consider these as an alternative too.
Learn more about the Cashplus Gold Pre-Paid Credit card