While credit cards are not the best way to manage your debt, there are some advantages of prepaid cards that make them good for managing finances. As credit card issuers tighten up their application criteria and issue fewer cards, the number of prepaid cards is rapidly increasing and the free ones are especially attractive. Here are some of the advantages of prepaid cards.
1. Respect and Accessibility
The proliferation of this payment method means that the major banks and card issuers are offering them in their product portfolios. One of the advantages of prepaid cards from these well-respected companies is that it adds a certain amount of respect to your finances. It also means they are likely to be accepted practically anywhere (although watch out for Chip and Pin in Europe).
2. Credit Checks
If you have a poor credit history, you know the pain of not having access to most standard credit cards. Choose prepaid cards and you can negate this issue completely. Since the card is prepaid, it means you aren’t actually borrowing money. Your credit score is unaffected and you get the convenience and benefits of prepaid cards when it comes to not having to carry cash and being able to shop online.
Use prepaid cards and you have just reduced your fraud risk. The beauty of these cards is they don’t have to be connected to your bank account. If the worst happens and someone manages to spend your money, they can’t run the bill up like they could with a standard credit card. Someone with a moderate sum on their card will only lose a moderate sum if they become a victim of theft.
4. Overseas Purchases
Prepaid cards are excellent for travelers because one of the benefits of prepaid cards is that you can save on currency conversion. With a lot of prepaid cards, you can switch between different currencies at no charge. This is something standard credit cards just don’t have. Next time you decide to buy something from overseas or go on vacation, you won’t have to deal with those nasty currency conversion fees again.
5. Child Management
Your finances’ public enemy number one is a child going on a trip. Simply giving them a wad of cash, or even worse your credit card, is like giving a tiger a puppy and telling it to take care of it. Use prepaid cards and you can have complete control over yours, and your child’s, finances. Many cards allow you to load them on a daily basis as well, which is perfect if your child is going away on a school trip or your teen is going on vacation with friends.
6. Budget Control
Use a credit card on a shopping trip and it’s easy to spend $100 on a pair of new shoes or splurge on a whole new outfit because it doesn’t feel like you’re spending real money. One of the excellent advantages of prepaid cards is they help you manage your finances by controlling your spending. Unlike with credit cards, you cannot spend what you haven’t got. If you can’t afford it, you can’t fund your card. It’s really that simple!
The ease of loading prepaid cards brings advantages too. As long as you choose a free prepaid card that doesn’t charge you for top ups, you can load it as often as you like. This makes it great for managing within a budget. If you’re going shopping, simply load it up with the amount you have budgeted for and no more. Leave your cash and other cards at home – et voila – you can’t overspend. Same applies for nights out, trips, holiday shopping etc…
8. Manage Online
You can keep your finger on the financial pulse whenever you want. Another of the advantages of prepaid cards is that you have your own personal account which you can access anywhere there’s an Internet connection. It gives a breakdown of all your transactions, along with real-time updates. This lets you have the same degree of monitoring you would expect from your usual bank account.
9. Travel Time
Prepaid cards are an excellent choice for travelers. They are a convenient payment method, they have the same security over cash and traveler’s checks that credit/debit cards do, choose the right one and you don’t lose out on currency conversion, and you can top it up with funds as and when to manage your travel budget.
One of the interesting advantages of prepaid cards I think, although not really anything to do with managing your finances, is that they can help in solving what I can only describe as a status issue. We don’t tend to broadcast our financial issues and problems but, if you are often in situations where you’d normally use a credit card – say for entertaining clients or work contacts – but don’t have one, you can use a prepaid card and no-one would have any idea it wasn’t a credit card. Do you use prepaid cards? What’s your experience of them?