Pros and Cons of Prepaid Credit Cards

A prepaid credit card has pluses and minuses.

A prepaid credit card is actually a debit card. You deposit a certain amount of money into the card account, and when you make a purchase, the balance is reduced by the amount of the purchase. Prepaid debit cards are accepted by merchants as credit cards, and are commonly marketed to people who want to build or rebuild credit. They also suit those who fear charging to a credit card more than they can repay.

Widespread Acceptance

Prepaid debit cards are convenient when you travel.

Because prepaid debit cards display the logo of Visa or MasterCard, they are accepted by merchants who accept Visa and MasterCard credit cards. This broad acceptance can prove most convenient, especially if you travel. Using checks, the other common cash alternative, can prove problematic. Some retailers and eateries do not accept even local personal checks. Once you leave your city, you can really run into trouble, because nonlocal and out-of-state checks are rejected by large numbers of merchants. Another cash alternative, traveler's checks are not universally accepted either. If your credit does not allow you to acquire a true credit card and you do not want to carry lots of cash, a prepaid debit card can be a good solution.

Not Debt

Using a prepaid debit card will not add to personal debt.

Since you can only spend as much as you have deposited into your prepaid debit card account, it is impossible to accumulate debt with the card. This makes the prepaid card an excellent tool for those who fear they will be reckless with credit. In addition, since you do not have to pay interest on such a card, you run no risk of paying more for an item over time than the retail price.

Embarrassment

The faces of some prepaid debit cards denote by word or symbol that the card is prepaid. Your prepaid card may prompt some friends and merchants to assume your credit record will not allow you to acquire a credit card. Thus, the prepaid card may cause salesclerks, waiters, or materialistic acquaintances to look at you with suspicion. Despite the fact that so many Americans do not have glowing credit, a social stigma still attaches to having poor credit. If the opinions of others do not faze you, so much the better. But if you worry over your social standing or reputation, you might hesitate to wield a prepaid card.

References

• CreditCards: What Are the Pros and Cons of Prepaid Debit Cards?