A prepaid card is an option for the people who do not or are unable to have a bank account. It’s also a good option for those who distrust banks. It is generally safe to use and also convenient. This is because you can carry out almost all the functions of normal bank cards with a few exceptions.
A prepaid card works similarly to a bank debit card, except that it is not linked with a bank account. So, the money you spend using your prepaid card is the money you have loaded on the card. This means that prepaid card users cannot exceed the money stored on the card.
The biggest difference between a prepaid debit card and a credit card is that a prepaid card is where you can spend your money that you have already loaded. By contrast, with a credit card, you borrow money from the bank which you have to pay off. A prepaid card and a credit card look the same, but both the cards offer a different mechanism of money being spent. Here are some pros and cons you may not have known about prepaid cards.
Pros of Prepaid Cards
Helps With Budgeting
It helps to make you aware of overspending as you cannot make more withdrawals if you have exceeded the amount present on the card. Therefore, it makes you aware of how much you’re spending every time you decide to use or reload your card.
Personal Information is Secured
Prepaid cards do not require any of your personal or financial information. The benefits of not having any of your personal information not linked to your card is that if it is stolen, you do not have to worry about identity theft or your information being misused. A very good option for those worried about losing their cards one way or another.
No Credit Check Required
Prepaid cards might be the best option to you if you have a poor credit. This is because prepaid cards do not require a credit check, making them accessible to everyone.
Cons of Prepaid Cards
No Bank Offers or Services
Prepaid debit cards are not linked to banks, so you cannot expect the same services on your prepaid debit cards as those offered by banks. Only a few prepaid card companies provide their customers with certain facilities like purchase protections.
Prepaid debit cards always come with certain fees that cover your card activation, ATM withdrawals and so on. You may also have to pay a monthly fee as maintenance.
Cannot Gain Credit
You may feel as though not using credit is a good thing, but building credit is important. In addition, you cannot spend more money than you have loaded in your prepaid card and cannot borrow money or build a credit like a traditional credit card offers you.
Your prepaid card does not provide you with as much security as your bank cards do. Security protection is dependant on the prepaid card company, as only some prepaid card companies offer purchase protections. You cannot enjoy all the security services that are provided by banks with prepaid card companies. Always make sure that you know about your prepaid debit card services and the facilities offered even before you get one.
There you have it, our pros and cons about using prepaid cards. To see more about which cards may be right for you, you can check out companies like MasterCard or Visa. If you’d like more advice on things like loans, check out the rest of our blog.