A pre-paid card can be used in much the same ways as a credit card can to pay for goods and services, and to conduct transactions online and off. The difference is that with a pre-paid card, you do not borrow any money to make your purchases, instead, you load the money onto the card before you begin to use it.
Prepaid-cards can be a great budgeting tool if used carefully. They can help you to make purchases that require a card – for example online transactions – without the need for a credit card or the worry of having debt that will need paying back. In other words, they offer all the convenience and flexibility of a traditional credit card, but none of the risks.
With a pre-paid card, you begin by loading the money on to the card. From this point on it can be used the same ways as a credit card might to book hotels, flights, make purchases and pay for services. However, because you are using your own money, it doesn’t matter if you don’t have a great credit score, or have been turned down for credit cards, or debit cards.
The advantages include:
• No interest charges
• No late fees
• Being able to make savings by buying online
• No fear of debt
• No credit checks
Using this type of card can let you budget one week at a time when you’re paid monthly. By loading a fixed percentage of your money on to the card, you will know exactly how much you can spend that week with no risk of going over drawn, but at the same time, because you’re using a card that’s not linked directly to your bank account, you also won’t risk over spending as this is something you can’t do with a pre-paid card as if there are not enough funds on the card to make the purchase it just won’t let you complete the transaction.
You can track your spending by receiving a text or e-mail daily to let you know what your balance is. This means you can keep a much closer eye on what you are spending. Unlike using cash it’s much easier to see at a glance what you spent the money on, and this combination is very useful for helping people to learn budgeting techniques and helping them to stick to a budget plan.
These cards can also be used for teenagers who are away at college or about to head there. It can give them access to make all their own purchases, but allow you to have easy control of what they have to spend. This means they can learn the value of money and using a card, but without any risk of going into debt.