Tuesday, January 24, 2006
Prepaid Credit Cards and You!
Credit Card companies are offering customers a new product that can change the way people handle their own and their family’s personal finance. This exciting new product is the pre-paid credit card. The “big 3” (Visa, Master Card and American Express) have all released their own branded version of this new product. The question are though, what is it’s purpose, how is it different than a credit card and why should you consider using it?
The best way to think of prepaid credit cards is to treat it as a gift certificate that is valid (almost) everywhere. Prepaid credit cards can be obtained at any bank or lending institution. They are accepted wherever credit cards are accepted. Nowadays, this means that you can use your prepaid credit card just about anywhere! Money can be “loaded onto” the card either through the Internet (each company has its own website) or through the bank. There is no transaction fee for purchases made with the prepaid credit card; the transaction is treated like a cash transaction. When the balance of the card has been spent, more money can be placed in the balance.
Prepaid credit cards look almost identical to their contemporary counterparts and as you may have picked up on, share some common characteristics. Prepaid credit cards are accepted everywhere that “normal” credit cards are accepted. Prepaid credit cards can also be used to withdraw cash at ATMs. Similarly to credit limits, prepaid credit cards can have spending limits, which dictate the maximum amount of money that can be spent per day. Prepaid credit cards, like normal credit cards, receive a monthly statement that dictate how they were used in the past month. Like credit cards, prepaid credit card usage is monitored to determine potential fraudulent usage and they can be cancelled if they are lost or stolen.
The one major aspect that differentiate credit cards and prepaid credit cards is that prepaid credit cards do not provide a line of credit. While users lack the ability to purchase goods or services on credit, this (dis)service is actually a mixed blessing. Credit cards can be dangerous. With monthly interest payments hovering around 20% on most cards, even small-unpaid balances can grow to become huge financial burdens. Without the temptation of buying goods or services that one cannot afford, the user is also protected from huge interest payments.
Prepaid credit cards came into existence as a result of a problem that occurred on University campuses across the world. Students, who were now of age, received their first credit card with a faulty understanding of how it worked. Students would “shop till they dropped” and be unable to pay off their monthly balances. This left students with huge credit card payments and cripplingly low credit ratings. For credit card companies, students were perfect customers. They always had parental support to payoff their balances and worse case scenario; they would eventually get jobs that would allow them to pay back their debt. While this worked out well for the credit card companies, it was a major hindrance to their new customers (and the customer’s parents). Prepaid credit cards prevent this problem from the start.
Prepaid credit cards have been marketed as a tool for parents and students to use together. The students get the freedom of using the credit card wherever they want and parents are able to choose the amount loaded onto the card, the daily spending limit and can even see where the card is being used (because monthly statements are issued). Parents can get an unbiased report of their child’s spending habits, which can serve to be a useful teaching tool.
While prepaid credit cards have been marketed towards parents and their children, I believe individuals can use prepaid credit cards to their advantage as well. If you are having hard time determining how you are spending your money each month, why not use a pre paid credit card? You can fill the card at the beginning of the month and use the statement to determine how you allocated your cash. You can then make adjustments to your spending habits.
Overall, the prepaid credit card is a great budgeting tool. It can help you, or a loved one to understand and improve their spending habits. For more information, go to a local bank , lending institution or check out http://www.visabuxx.com
The best way to think of prepaid credit cards is to treat it as a gift certificate that is valid (almost) everywhere. Prepaid credit cards can be obtained at any bank or lending institution. They are accepted wherever credit cards are accepted. Nowadays, this means that you can use your prepaid credit card just about anywhere! Money can be “loaded onto” the card either through the Internet (each company has its own website) or through the bank. There is no transaction fee for purchases made with the prepaid credit card; the transaction is treated like a cash transaction. When the balance of the card has been spent, more money can be placed in the balance.
Prepaid credit cards look almost identical to their contemporary counterparts and as you may have picked up on, share some common characteristics. Prepaid credit cards are accepted everywhere that “normal” credit cards are accepted. Prepaid credit cards can also be used to withdraw cash at ATMs. Similarly to credit limits, prepaid credit cards can have spending limits, which dictate the maximum amount of money that can be spent per day. Prepaid credit cards, like normal credit cards, receive a monthly statement that dictate how they were used in the past month. Like credit cards, prepaid credit card usage is monitored to determine potential fraudulent usage and they can be cancelled if they are lost or stolen.
The one major aspect that differentiate credit cards and prepaid credit cards is that prepaid credit cards do not provide a line of credit. While users lack the ability to purchase goods or services on credit, this (dis)service is actually a mixed blessing. Credit cards can be dangerous. With monthly interest payments hovering around 20% on most cards, even small-unpaid balances can grow to become huge financial burdens. Without the temptation of buying goods or services that one cannot afford, the user is also protected from huge interest payments.
Prepaid credit cards came into existence as a result of a problem that occurred on University campuses across the world. Students, who were now of age, received their first credit card with a faulty understanding of how it worked. Students would “shop till they dropped” and be unable to pay off their monthly balances. This left students with huge credit card payments and cripplingly low credit ratings. For credit card companies, students were perfect customers. They always had parental support to payoff their balances and worse case scenario; they would eventually get jobs that would allow them to pay back their debt. While this worked out well for the credit card companies, it was a major hindrance to their new customers (and the customer’s parents). Prepaid credit cards prevent this problem from the start.
Prepaid credit cards have been marketed as a tool for parents and students to use together. The students get the freedom of using the credit card wherever they want and parents are able to choose the amount loaded onto the card, the daily spending limit and can even see where the card is being used (because monthly statements are issued). Parents can get an unbiased report of their child’s spending habits, which can serve to be a useful teaching tool.
While prepaid credit cards have been marketed towards parents and their children, I believe individuals can use prepaid credit cards to their advantage as well. If you are having hard time determining how you are spending your money each month, why not use a pre paid credit card? You can fill the card at the beginning of the month and use the statement to determine how you allocated your cash. You can then make adjustments to your spending habits.
Overall, the prepaid credit card is a great budgeting tool. It can help you, or a loved one to understand and improve their spending habits. For more information, go to a local bank , lending institution or check out http://www.visabuxx.com
# posted by mikeyarmo @ 2:35 PM 
