The development of the current society shows that people have refused to pay cash even buying a cup of coffee. Moreover, they are reluctant to use usual credit cards since they are limited in possibilities. So, that there is a force coming tendency of using prepaid credit cards. Speaking about prepaid credit cards, we should figure out the advantages and disadvantages of prepaid cards in comparison with usual credit cards; what the most beneficial types of prepaid cards are, and, finally, how to utilize those cards properly.
First of all, it is necessary to define what a prepaid credit card is. A prepaid credit card is opened by depositing money on your account without checking and can be used everywhere. So, you can handle it until you have money on the card. You can charge it with any amount of sums without additional paying. Prepaid credit cards are mostly used when using the need to buy some goods in a store and it is also used for online purchases.
There are different brands of prepaid credit cars which are offered by various financial and banking institutions. The main brands are Visa, Master Card, American Express, Maestro, Green Dot, Amex, and Discover. Prepaid credit cards of different brands may be issued by the same bank. The major difference between them is the number of fees imposed for ATM and commission fees as well. For instance, research of all UK prepaid credit cards such as MasterCard, Visa CHIP first, Maestro Electron Mag showed that cardholders can set up Money Express Card free of charge and you do not have to open an account in the bank. So briefly viewing different types of cards, it is hard to choose the right one since each one is suitable for a certain situation. Anyway, Maestro, Visa, and Mastercard are considered the most profitable and respectable prepaid credit cards.
Prepaid credit cards can also be divided according to their function. There can be a telephone prepaid card that allows people to make calls from any telephone and recharge the account from their own funds. For instance PTT telecom, mobile phone applies two types of cards: prepaid phone cards and Scopecards. Besides those cards, the use of prepaid credit cards of the company takes place in restaurants (Ajami R. A. 449). A gifted prepaid card is a type of card that be used as a means of accumulating money for certain holidays such as New Year or Christmas. These cards are used by different brands and some of them may even grant their holders with certain charities (Harris G. 127).
Taking into consideration the information mentioned above, it is desirable to be aware of how to choose a suitable prepaid credit card. So, while setting up the card you should carry out a thorough examination of charges issued by card since some cards require additional charges before topping up the account or making a money transaction (Catherine’s UCLA Website). In general, prepaid credit cards are often used by people with bad credit cards in order to have a credit facility. Further on, before choosing the right prepaid card, make inquiries about the amount of charging, and the sum of money charged when withdrawing money from the account, ATM fees, and whether it is accepted by different establishments.
The major merits of prepaid credit cards are rather impressive. To start with, the primary point is that you can pay off without using cash if have no any at the moment since they are easily accepted similar to usual credit cards. Secondly, you do not have to use your credit record, just your name, and address. Moreover, a prepaid credit card can be used on the internet and the phone, as well. It means that you can check your account through telephone and make online and offline purchases. As a result, it offers convenience and a high level of availability. In addition, with the help of a credit card, you can easily operate your time and work out your financial strategy (Bucci 75). Another important merit of prepaid credit cards consists in the idea that they are widely used when going on a journey abroad since they can be used irrespective of the type of local currency. Besides, it can be charged by any other currency depending on what country you are visiting (Essvale Corporation Limited 122). And finally, you will never be in debt since you spend your own money only. Comparing prepaid credit cards with usual credit cards, it is worth adding that the prepaid ones are more reliable and simpler in application since you can always be sure that you will not spend more money than you have on your account.
Still, prepaid credit card has their disadvantages. One problem lies in the fact that before using a prepaid credit card, you are to be sure you have sufficient credit. Especially, it concerns prepaid phone cards when you do not have enough money to make a call or, even worse, the phone battery is discharged (Mennen A. 32). Sometimes you do not have the opportunity to top up your account for the reason of not having cash due to some unforeseen circumstances. In this respect, credit cards are more suitable.
The main target audience of prepaid credit cards is people who express unwillingness in using credits and to be in debt. It is worth adding that teenagers could also be considered as potential possessors of prepaid credit cards. It might be convenient when a teenager is restricted in access to money. Besides, it is especially important when parents want to control their children and their expenses. (Bodnar J 220). ). A prepaid credit card is rather convenient when your child is planning to travel abroad. Using the prepaid product, you can easily find out where he/she spends money. Prepaid credit cards may be used by people with a low poor credit rating as well.
So, as it may be seen, prepaid credit services do not have many drawbacks since the main conception of that product is the lack of necessity to use credits and therefore you don’t have to be in debt. Such an idea helps a credit holder to estimate his/her income most reasonably and to plan accurately the expenditures. That is important since the target audience of that product is mostly teenagers. Consequently, it considerably influences the future generation’s attitude to money. The importance of prepaid credit cards lies in the fact that they are considered to be the next step of the development of the credit card system which contributes greatly to the credit history (Burrel J. 103).
Ajami, Raid A., Cool, Karel, and Fox, Tina. International Business: Theory and Practice. US: M. E. Sharpe, 2006.
Bodnar, Janet. Raising Smart Kids: What They Need to Know about Money and How to Tell Them. US: Dearborn Trade Publishing, 2005.
Bucci, Steve. Credit Repair Kit for Dummies. US: Willey Publishing, Inc., 2008.
Burrel, Jamaine. How to Repair Your Credit Score Now: Simple Methods You Can Put to Use Today US: Atlantic Publishing Company, 2007.
Essvale Corporation Limited. Business Knowledge for IT in Retail Banking: The Complete Handbook for IT Professionals: UK Edition, UK: Essvale Corporation Limited, 2007.
Harris, Godfrey. The Hottest Ideas in World of Mouth Advertising: what works, what does not US: Americas Group, 2004.
“How to choose a prepaid credit card” 2006 UCLA. Web.
Mennen, Andrew. It’s Your Call: the Complete Guide to Mobile Phones: Money Savings Tips for Users. Australia: Relianz Communications Pty, Ltd, 2005.