Guide To Pre Paid Credit Cards
Pre-paid credit cards are designed in the same way as debit or credit cards. They feature a card number, signature strip and company branding. A pre-paid credit card does not work unless it has been loaded with money which is quite different from traditional credit cards.
Topping up can be done through stipulated procedures with some of the most common being transferring funds directly from a bank account or mobile phone money. It is worth pointing out that you cannot borrow money using a pre-paid credit card. People that use these cards do so because they make shopping convenient while eliminating the risks that are associated with carrying cash.
How To Get A Pre Paid Credit Card
Before getting the right card you are advised to carry out some research to learn about the various options available in the market. Compare pre-paid credit cards by looking at some of the terms and conditions that govern their usage. It is encouraged that you opt for cards that are issued by reputable companies. The card you pick should be able to work in most places. It should also offer convenient ways to for topping up.
Once you have determined the ideal card go ahead and read about the requirements for acquiring the card before applying according to instructions provided. Most companies can process the card within a week and have it delivered to a place of your choosing.
Considerations To Make Before Picking A Pre Paid Credit Card
- Activation fees – this refers to the amount of money you are charged to have your card activated and ready to transact. Comparing fees charged by different companies should allow you to choose something that falls within a reasonable range.
- Monthly fees – some companies charge a monthly fee to ensure that clients get exceptional services. There are also certain companies that do not charge a monthly fee but rather allow clients to make a standard payment annually.
- Transaction fees – every time you carry out a transaction with your card you may incur charges depending on the amount that you use. Be sure to consider the exact amount you are charged so that you can avoid picking a card that may end up being too expensive for you to manage.
- Cash withdrawal fee – these cards offer a feature that allows you to withdraw cash from an agent or automated teller machine. The costs may vary depending on the ATM operator you choose to work with.
- Other considerations – you are also advised to have a look at the communication options available in case you run into a problem with your card. Balance inquiry, dormancy, statement check and loading charges are all issues that should help inform your decision.
How And Where You Can Use These Cards
- Shopping – much like a credit card you can use this card to pay for the things you get from local shops. All you must do is provide the relevant details to the shop attendant who will then verify information and charge the total amount to your card.
- Telephone shopping – if you are making your purchases using a telephone all you must do is read out the card details to your service provider. They will charge the total amount to your card.
- Internet shopping – once you have selected all the items you want from your favourite merchant you will be prompted to give your card details before the order is completed.
- Cash withdrawal – you can get cash by paying a visit to a compliant ATM machine and inserting the card into the card slot. Follow the instructions on the ATM screen to get your money in cash.
The Advantages Associated With Pre Paid Credit Cards
- Cushions against debt – individuals that use traditional credit cards tend to incur a lot of expenses because they can access credit facilities. Using a pre paid card ensures that you can only spend the amount that is available at the given moment.
- Gives you full control – using a credit card means that you can spend more money than you intend to. You are also given a set limit for spending depending on the determinations that are made by your credit card issuer. A pre paid card on the other hand allows you to have full control of your funds. You can load it with an amount you choose and spend according to your capabilities.
- Enhanced travel convenience – these cards can be used internationally making it possible for you to get the services you want without necessarily seeking currency conversion services. Regardless of where your travels take you to you will always be able to make payments directly from your card.
- Securing your money – walking around with a stash of cash in your wallet or purse may present quite a challenge when it comes to security. You may end up misplacing the cash or have it stolen. A pre-paid card makes it possible for your money to remain safe even when you lose your purse. It is worth pointing out that if you lose the card all you must do is contact the issuer and have the card deactivated before you receive a replacement.
- Acts as a basic bank account – you can receive salary or payment of wages directly to your card. All you must to is give the card number to your employer who will then load funds into the card. It is worth pointing out that you can keep track of all your transactions while making informed budgets using the information available on your card.
- Student cards – some card issuers allow students to make applications and receive cards. Their parents or guardians can then load the cards with an amount of their choice giving the students the ability to shop or pay for services at their own convenience. These cards allow young people to improve their financial management skills.
- It is easy to acquire – most financial institutions require a lot of things before giving out a credit card. However, the process of acquiring a pre paid card is quite simple and straightforward. Just about anyone can apply and receive a pre paid card within a week depending on the issuer.
There are two basic categories of prepaid cards; pay-on-the-go and ones that are payable on a monthly basis. Although the latter come with a monthly charge, the transaction fees are significantly lower than the amounts applicable to pay-on-the-go cards. Additionally, most providers offer some sort of reward, depending on the amount one spends.
Pay-monthly cards are ideal for those who often make purchases using their card. On the other hand, pay-on-the-go cards would suit individuals who use their cards sparingly. Prepaid cards would be the best option for individuals on a tight budget and parents who want to closely monitor or control the spending habits of their children. This is thanks to the fact that one can only spend the amount they initially loaded onto the card. This feature also makes them suitable for business use.
When applying for a prepaid credit card, no credit checks are required. As such, it’s relatively easier to obtain one when compared to debit and credit cards. Individuals with a less-than-ideal credit score, or even no documented credit history, would greatly benefit from this feature. Some providers also offer a credit-building program with their cards to help clients enhance their creditworthiness.
Some prepaid credit cards can allow one’s salary to be loaded onto them. This means that the cards practically act as alternatives to a regular bank account. The cards could be of great benefit when one is traveling overseas. Some providers allow clients to load foreign currency onto the cards prior to their trips. Consequently, one is able to go around the exorbitant charges that often apply when one uses their debit or credit card abroad.
The Disadvantages Of Pre Paid Cards
- A lot of fees – in most cases you must pay a lot of fees to have your card operating normally. Some of the fees involved include activation, transaction and withdrawal fees. Therefore you are advised to choose a card that charges low fees.
- You cannot spend what you do not have – there are certain times when you absolutely need an item or service but cannot afford to pay for it at the given moment. Credit cards allow you to acquire such things and pay later while a pre-paid card only allows you to spend what you have.
- Has no accumulation of interest – while you can use your pre-paid card as a basic bank account the truth is that you do not get the benefits of running a bank account such as accumulation of interest on your funds.
When applying for a pre paid credit card, it’s very important to carefully examine all the details. Some cards could carry many kinds of fees. You should especially look out for monthly charges, fees charged for loading cash onto the card, as well as withdrawal and transaction fees. Some providers are also known to charge clients if the card isn’t used for several months.
Regular credit cards have special legal provisions to safeguard consumers and retailers against damaged/faulty goods and purchases between certain amounts respectively. This is covered under the Consumer Credit Act of 1974 (Section 75 to be more specific). However, prepaid cards aren’t covered under the said law, or even under the 2011 Consumer Credit Directive either. The latter extended the protection amount from £30,000 to £60,260.