There was a time when prepaid cards had a stigma attached to them. That stigma was that only people with bad credit use prepaid cards. The thought was that you would only apply for a prepaid card because you were not eligible (because of bad credit) for a traditional credit card or even a checking account. Well prepaid cards are becoming more and more popular and they are not in anyway shape or form just being used by people with bad credit. Part the increased popularity might have to do with the state of the economy over the last several years and the unfortunate increase in credit card debt. As an alternative to credit cards a prepaid card is a great choice. This article provides ten solid reasons why a prepaid card can be the better choice over a credit card.
Low Fees
Due to the increased demand for prepaid cards, banks now have to compete for your business. For those of us that are in the market for a prepaid card that is great news. With the addition of more and more cards on the market we are seeing lower and lower fees.
No Interest or Penalty Fees
One of the greatest perks of using a prepaid card is that they do not have costly fees. This means there are no over-the-limit fees, no over-draft fees, no late payment fees, and no interest fees. With prepaid cards you can only spend what you deposit on to the card and because if this it eliminates the possibility of being charged fees. because you can only spend what you deposit on the card.
Rewards
Up until recently prepaid cards did not offer any sort of rewards program. However, with the prepaid popularity booming we are now seeing prepaid cards that also have rewards programs. One such card is the UPside Visa Prepaid Card which now offers a cash back offer for its card members. AccountNow offers what they call a “prewards” program and it gives members a $25 bonus when you sign up for free direct deposit. As these cards are becoming more widely used and the demand continues we are sure to see more prepaid cards offering rewards programs sooner rather than later.
Build Positive Credit
There are prepaid cards out there that report to the major credit bureaus. Some (not all) prepaid cards have the added feature that allows cardholders to build a credit history. Each card works differently and you should definitely understand the differences before you start using the card. The AccountNow Visa is a prepaid card that helps build credit and offers two unique options for cardholders.
No Risk of Going Into Debt
One of the best things about using a prepaid card is that you will not go into debt. This is because of the deposit you are required to place on the account before you can start using it. Once the money is gone you simply make another deposit. You are not given a line of credit but instead you are spending money that you have already paid to the account and this is why you can not go into debt.
Direct Deposit
Just about every prepaid card offers direct deposit. As a matter of fact, I can’t think of a card that doesn’t. Direct deposit allows for your paycheck to be deposited right into your prepaid account. Instead of receiving a paper check from your employer, your check gets put right onto your card. This will allow you to avoid having to possibly pay to have your check cashed. Some cards allow for you to have your government funds like social security deposited into your prepaid account as well. There are also cards that offer free direct deposit like the Mango Money Prepaid MasterCard. All cards work differently so make sure you review all the terms of the cards your interested in.
Guaranteed Approval
Anyone, regardless of your credit history can be approved for a prepaid card. This is because unlike traditional credit cards, prepaid cards are not a line of credit. They are also not linked to any checking or savings account. Prepaid cards require you to make a deposit onto your account and the amount of your deposit is what determines your limit. For example if you make a $300 deposit then your limit is $300. When you use your card you are really using money you have already deposited onto the account. This is why you can get approved for a prepaid card even if you have had credit issues in the past.
Online Bill Pay
There is no question that using online bill pay is a convenient way to manage your bills. Using your prepaid card to pay your bills online is safe and simplifies the process eliminating the need for stamps. Many prepaid cards offer a free online bill pay service through your online account. NetSpend® Visa® Prepaid Card and GreenDot MasterCard both offer online bill pay.
Safer Than Cash
Using a prepaid card is much safer than carrying cash. In the even that you do lose your prepaid card you can always call and have the card canceled. The bank can put a hold on your account so it can not be used and you can have another card issued. Most prepaid cards do charge a fee for a card replacement and that charge can vary. It is typically around $10.
Helps with Budgeting
Effectively budgeting your money is one of the biggest challenges in personal finance. There are many budgeting tools available from computer programs to financial advisers, but they are often too costly for the average person. Using a prepaid card is one tool you could use to stay within your limits. With your prepaid card having a definite limit and one that you can not exceed you have no choice but to manage your funds within your limit.
