Paying for things with cash or checks seems to be a thing of the past. Most consumers today prefer to use credit cards, even when they have overextended their limits on their current cards. In fact, the quickest way to increase your spending capacity is to open up a few new credit card accounts. Unfortunately, this can often lead to a path of spiraling debt.

Prepaid credit cards are one of the ways that consumers can continue to spend without creating a mountain of debt. Prepaid credit cards are ideal for consumers on a limited budget. They provide the convenience of easy spending, while limiting the possibility of overspending at the same time. Additionally, prepaid credit cards are easy to use and easy to purchase.

What is a prepaid credit card?

A prepaid credit card is one that has a specific spending amount attached to it. In particular, a consumer determines the credit limit of the card by putting a certain amount of cash on the card at the time of purchase. Prepaid credit cards are used in the exact same way as a regular credit card. There isn’t any need to tell the cashier that the card is a prepaid credit card and no one is aware that the card is not a regular credit card.

Why get a prepaid credit card?

For people who have bad credit histories, a prepaid credit card is easier to acquire than a traditional credit card. No credit checks are necessary since the consumer uses cash to purchase the card. Therefore, a consumer with a bad credit history can acquire a means of credit without taking a chance that they will fall further into debt.

The spending limit is predetermined by the amount of cash that is used to purchase the prepaid credit card. Therefore, consumers who obtain one know that they will not spend more money than they can afford. The prepaid card cuts off once the funds are gone.

Additionally, prepaid credit cards are excellent learning tools for teenagers. They offer teenagers with a safe way to spend money without incurring debt. They can offer your teenager a taste of financial freedom without the inherent danger that often comes along with credit cards. The parent retains some control by purchasing a card with its preset limit, but also express trust in his teenager.

Prepaid credit cards are also perfect gifts. They are easy to purchase and simple to give. Moreover, since prepaid credit cards can be used anywhere that credit cards are accepted, they are easy to spend.

Prepaid Card Advantages

• Simple application process
• No interest charges accrue
• No credit checks
• No income requirements
• No background checks
• Available in numerous locations
• Can be used anywhere that credit cards are accepted
• As widely accepted as traditional credit cards
• Look like typical credit cards

Prepaid Card Disadvantages

• A set up fee is usually charged
• The set up fee can be expensive
• Cannot be used for automatic monthly billing charges or payments
• Need to have the cash up front to purchase one
• Can be difficult to keep track of the balance

There are plusses and minuses to using a prepaid card instead of a traditional credit card. However, with those on a strict budget, the benefits of using a prepaid card usually far outweigh the disadvantages. Since the origination fees and other miscellaneous fees vary from one company to another, it is important to shop around for the prepaid credit card that will cost the least to maintain.