Prepaid card advantages and disadvantages
There is a great drive for many people in the world especially in the developed countries which were badly affected by the credit crunch to get a prepaid card. Many people have found credit hard to come by and so have resorted to prepaid cards.
What is a prepaid card
A Prepaid card is a card that mostly works like a credit card or a debit card but it has to bee preloaded with money for the cardholder to spend. The card can be used in outlets that credit and debit cards are used.
Prepaid card advantages
- A prepaid card uses money that is loaded. This means it will not lead you to get into debt. Prepaid card can help manage your finances and the amounts loaded will be what is available for use.
- It does not matter whether you have a bank account or not, the applicant can access the prepaid cards when they purchase the cards. This card may be used to reach the unbanked masses in many countries.
- The prepaid card can be given to your children or wife while they travel. The card can be reloaded online for whatever amount is required as per the guidelines of the card company.
- Prepaid cards are faster to get since there is no credit check done.
- The prepaid cards are used to improve credit rating but the cardholder or the card company must give this account to the card reference bureau.
- The cardholder is able to load just what they require especially where they are suspicious of online fraud. Once the funds are depleted, the cardholder waits for the next time when they want to shop and then they load just what they require. This card is not linked to a current or savings account, so if a card is stolen, the money in the bank account is not touched and is safe.
Prepaid card disadvantages
- The prepaid cards have many charges that eat away at the available spending amount. Some companies have hidden charges and after the card has been used at a point of sale or ATM, a charge is debited directly in the cardholders account. Ensure to understand all the costs that are associated with the prepaid card that you get
- There is no cash back guarantee like for credit cards. When a prepaid card is used online, and the goods are not delivered or are damaged, some prepaid card companies do not insist that the cardholder get their money back.
- For those customers who do not like to go online, the prepaid card is seen as a problem since the cardholder is expected to get their balance online. They may be embarrassed if the transaction fails due to lack of funds.
A cardholder has to be aware of prepaid card advantages and disadvantages of the product they have signed up for.