Prepaid cards are gaining popularity as it is safe, easy to carry, and is a convenient way to limit your expenditure. And it can be used in both international and domestic markets. A prepaid credit card lets you deposit money into it and use it whenever you need to make a transaction. It is a great option to use if you have bad or no credit if you want to keep a check on your spendings, or even for gifting. So, if you have decided to apply for Prepaid Cards, here are some things that you should know about it before applying:
You Do Not Have To Provide Collateral: When you apply for a prepaid credit card, you will not have to pay a deposit as collateral which will be held by the bank. You usually have to deposit an amount that will be held by the bank in a secured credit card, but this will not be the case with a prepaid credit card. You can use a prepaid card just like cash or check.
You Do Not Have To Pay An Interest Rate: When you use a prepaid card, you can only spend the amount that is on the card, unlike a credit card. And you do not have to pay an interest rate. When you use up the amount that is in your prepaid card, you will not be able to make any more purchases as the card will get declined. If you are looking to improve your credit score or avoid debt, using a prepaid card is a great option.
You Do Not Need Good Credit To Be Eligible: You do not need to have a good credit score or any credit score at all to be eligible for a prepaid card. A credit check is not necessary since a prepaid card is tied to your money and not a loan from a financial institution. And no matter how bad your credit score is, it does not matter as long as you have the cash to load into your prepaid card. So, if you are looking to improve your credit score, a prepaid card is a great option.
If You Lose The Card, You Will End Up Losing Your Money: One of the disadvantages of a prepaid card is that, if you lose the prepaid card, you will end up losing all the money that you have in it. So, in situations where you end up losing the prepaid card, make sure that you report immediately. Another important thing is to make sure to read the terms and conditions of the card that you are considering using so that you will know what to do in case of theft or you end up losing the card.
It Will Not Affect Your Credit Score: Using a prepaid card will not affect your credit score, this means that if you are looking to build your credit score, it cannot contribute as a credit card could. Likewise, it will also not make your credit score go any lower. Prepaid cards are a great way if you are looking to limit your spending, if you want to give funds as cash, or when you do not want to carry cash.
There May Be Limited Fraud Protection: Perhaps the major disadvantage of using a prepaid card is that there is limited to no fraud protection. So, if your card gets stolen or lost, you may have limited protection as compared to a credit card. Prepaid cards are not covered by any law, as credit cards are with the Truth in Lending Act.
So, these are a few of the things that you should know before you decide to apply for a prepaid credit card.