Prepaid Credit Cards Explained
Jul 19, 2009 Prepaid Credit Card
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If you’ve ever used a store gift card, then you’ll understand how a prepaid credit card works. The concept is very simple: a prepaid credit card is pre-loaded with your own money, so you are only able to spend up to a pre-determined, set limit. These cards can usually be used virtually anywhere that a standard credit card is accepted.
Prepaid credits operate in exactly the same way that a regular credit card operates. When paying for your item or service, the card must be swiped and then the PIN (which you will receive with your card) can be entered or in some cases you can sign the receipt. The total amount of the transaction is then taken from your card instantly.
The main difference between a prepaid credit card and a normal credit card account is that with prepaid card, you are dipping into your own money, rather than using funds borrowed from your lender. Therefore, you can only use the card until your pre-loaded cash runs out, or until you top up the account. Funds can be loaded onto your prepaid card by cash at your bank or at the Post Office, via bank transfer, or via payment from another credit card.
A prepaid card looks like a regular credit card, and can be used to buy all sorts of everyday expenses, including petrol, groceries and bills. Prepaid credit cards are particularly useful, however, when you’re shopping online or overseas.
Some online retailers and service providers, such as certain airlines and hotel websites, only accept payment via credit card, and a prepaid account allows you to shop on their websites without needing an active credit card account.
A further benefit of the prepaid card is the flexibility it provides. For example, if you’re new to a country and you haven’t had time to build up a credit rating yet- or you have a bad credit history and you’re starting your credit record from scratch - a prepaid credit card could help you build or improve your credit file.
Furthermore, if you’re going on a holiday, a prepaid credit card offers you the opportunity to load a certain amount onto your card, so you can avoid paying foreign currency exchange fees - allowing you to stick to an estimated or agreed budget!
With prepaid credit cards you will not be subjected to credit checks, so you can usually sign up for a card immediately. Just beware for the fees: some providers charge a card application fee on top of monthly service charges, cash load/deposit fees and withdrawal/purchase fees, so its beneficial to browse around for the best credit card deal at the time.
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Tags: Credit Card, Credit Cards, Personal Credit Card, Prepaid Credit Card
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