| |
Prepaid
credit cards
are new twists on the popularity of plastic
money. The name says it all. They are cards that
function just like credit cards in nearly all
aspects, but you have to pay the spending limit
upfront. It's like a prepaid phone card you can
use to buy anything at all.
There are a lot of benefits to a prepaid credit card,
as well as many different applications for the
technology. The most obvious benefit is that you
can't go over your limit. There is no such thing
as over drafting from an account. When the
account is empty, you simply cannot use the card.
You have to refill it before any more purchases
can be made. This is very good for people who
have poor credit history
or impulsive spending habits. It can help people
avoid debt and be a good first step in rebuilding
a low credit score.
These cards are also good for teenagers whose
parents may want a middle step before getting a
full service card for their children. Parents can
fill the card with an allowance (or teens can put
summer job paychecks into the card) whenever they
want to, and junior gets to enjoy the freedom and
security of credit card spending. Purchases can
also be monitored with this system, which can help
a teen increase his financial savvy. By seeing
exactly where his or her money is going, they will
be more likely to develop good habits they can
keep throughout their adult life. An added bonus
is that these cards frequently look the same as
full-service cards, which enables teenager to keep
their pride intact when the go out with their
friends.
Pre-paid credit cards are also being used for
specific situations. Most prevalent is the Visa
Gift Card, which can be bought in any denomination
and given as a gift. Recipients can spend the
money anywhere, any way they wish. Another
specific application is Visa's Travel Money Card.
It can be loaded directly from an ATM with funds
from a checking or savings account, and then
carried in place of cash or travelers checks. It
is also covered under Visa's Zero Liability Plan,
which protects it against fraudulent purchases,
card theft, and identity theft.
A third application that is growing in popularity
is the payroll card. The payroll card is a great
way for companies to reduce payroll costs and help
the environment. A payroll card can be given to
every employee of a business and then at the end
of the pay period employees receive a direct
deposit of the funds they have earned. This is
available immediately upon deposit, which saves
the employee the time it would take to go to the
bank, wait in line, pay a cashing fee, etc. It
also saves the company the time and money it takes
to print and mail paychecks. Employees who may
not have a bank account can take advantage of the
system as well. Since all funds are deposited
into the card account, there is no need for
separate checking or savings accounts.
There are a few downsides to the prepaid card.
Most cards require a start-up fee, and while for
many companies this fee is minimal, some of them
are substantial. Another downside is that many
businesses that accept automatic payments from
bank or credit card accounts will not accept them
from prepaid cards. For most consumers this is a
minimal annoyance, but for some it can be a
significant setback. As with a normal credit
account, when selecting a prepaid card it is best
to research your options and make an informed
decision on the best card to meet your individual
needs.
|
|
