A prepaid credit card is one in which the consumer determines the credit limit of the card by putting a certain amount of cash to the purchase of the card. They are used in the exact same way as a regular credit card.

Why get one?

A prepaid credit card is easier to acquire than traditional credit cards for people who have bad credit. Therefore, a consumer who has a bad credit history, but who has been able to begin the small climb back from endless debt, is able to acquire a means of credit.

The amount of spending is limited to a predetermined amount of cash. Therefore, consumers can guarantee that they will not spend more than they can afford, since the card cuts off once the previously placed funds are gone.

Prepaid credit cards provide teenagers with a safe way to handle spending without incurring debt. It is a good initial step to allowing your teenager a bit of financial freedom in which the parent retains control, but expresses their trust in the teenager’s responsibility on an initial level.

Gifts are often troublesome to select. A prepaid credit card is the perfect gift. No fuss and no muss are attached to this simple transaction. Moreover, it is sure to be appreciated since it can be used anywhere that credit cards are accepted.

Advantages

• The application process is simple.
• No interest charges will accrue.
• No credit checks, no income requirements, and no background checks are necessary.
• Prepaid credit cards are available for purchase in numerous locations, anywhere that credit cards are accepted.
• Prepaid credit cards are as widely accepted as traditional credit cards.
• Prepaid credit cards look like typical credit cards, most commonly Visas and MasterCards.

Disadvantages

• A set up fee is usually charged and may be expensive, depending upon the origin of purchase.
• In general, prepaid credit cards cannot be used for automatic monthly billing charges or payments.
• The individual making the purchase of a prepaid credit card will need to have the cash up front.
• Keeping an idea of the balance available on the card may prove to be troublesome in a minor way.