What Are Prepaid Credit Cards?

What are prepaid credit cards? Prepaid credit cards have given a new twist to the world of plastic money. The name truly says it all; they are credit cards that function just like a regular credit card in almost all aspects of spending. The only difference really between prepaid credit cards and a regular credit card is that you have to pay the spending limit upfront. It’s very similar to using a prepaid phone card or prepaid tracfone/ cell phone. So why the big hype? Let’s take a closer look at why so many people love prepaid credit cards and why banks have turned to using them much more these days.

What are prepaid credit cards?
Prepaid credit cards function in the same way as a debit card would function. By opening an account you can transfer a certain amount of money into that account and you will be issued a prepaid credit card. The card is tied to an account with the bank and once the money has been spent you have to “refill” the card. Much like a prepaid calling card. So why do people love them so much? Here are some great benefits to having a prepaid calling card.

Benefit #1: No overspending
In today’s day and age we are so prone to spending more money than what we actually have. With so many different credit cards out there today people fall into the idea that they can spend, spend, spend, and not worry about the consequences until later. The reality of it is that over half of the individuals that qualify for traditional credit cards will find themselves in serious debt only one year after they’ve received the card. It then becomes a downward spiral trying to pay back the money and before you know it you’re credit standing is down the kisser. Prepaid credit cards are a great way to keep your spending in check because once the money is gone you can’t use the card anymore unless you put more money on it. There’s nothing like having a credit card with a spending limit that won’t put you into more debt than you already have. You spend what you have; no more, no less. Prepaid credit cards can help you rebuild your credit standing.

Benefit #2: Great teaching tool
For those individuals out there that have no credit history whatsoever prepaid credit cards can give them the start they need because they can help teach how to be responsible in your spending. They’re especially great for parents with teenagers who want to give them a bit of freedom but still control their spending a little. Parents can fill the prepaid credit card with a certain amount of money and let their teens use the card for purchases. The best part about this is that you can actually track their spending by going to your own website for the prepaid card, putting in your password and watching where the card is being used and how. They are very similar to a debit card that they work great for parents and teenagers.

Benefit #3: Great for Business Payroll
Another way that prepaid credit cards are being utilized today is with businesses. It is becoming a growing popularity to use them as a payroll card instead of issuing checks to employees. This can help reduce payroll costs for printing checks and helps save the environment by using less paper. Payroll cards are given to employees and every pay period the employee will receive a direct deposit onto their prepaid credit cards. It’s available immediately upon deposit which we all know can save us time going to the bank and waiting in line. Employees without bank accounts can really take advantage of this system as the money is deposited directly onto their card.

So what are prepaid credit cards? They are the new way of spending exactly what you have and keeping track of your spending habits. They’re a great way to rebuild credit and a great way to earn credit.