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A prepaid
credit card works very much like a
debit card. In order to make purchases or take
cash advances, there needs to be sufficient
funds in the account attached to the
prepaid credit card. If that fund contains
insufficient funds, the intended prepaid credit
card purchase won’t be approved.
To call this type of card a prepaid credit card is
misleading because absolutely no credit is
extended. The reason why the word credit gets used
is probably because both Visa and
MasterCard offer them. Because of this, these
cards can be used anywhere to make any type of
purchase that could normally be made using a
regular credit card. The difference is that the
limit on the prepaid credit card is determined by
the amount of money currently on deposit.
A prepaid credit card usually is the only type of
card that those who are recovering from a
bankruptcy or who have a less-than-perfect
credit history are able to secure. These cards
are perfect to give to teenagers or children who
are heading off to college. And employers are
finding that giving prepaid
credit cards to employees who travel or who
entertain clients is an excellent way to control
costs while away from the office.
There are other benefits as well. Since credit
isn’t an issue, interest is not charged on
purchases. Obtaining a prepaid credit card is easy
too. In fact, those interested in such a card
usually won’t have to await a credit check. Your
past payment history doesn’t matter because you
won’t be making monthly payments. And because you
cannot make purchases if you don’t have sufficient
funds in the account to cover those purchases,
there’s almost no way you can get into debt.
When the funds in the account attached to the
prepaid credit card get below a certain level,
it’ll be necessary to replenish them. This can be
easily accomplished by depositing cash into the
account, transferring money over from another
account, or you could use another credit card to
advance the cash. This last option however, could
cause you some financial trouble if you aren’t
careful!
If you think a prepaid credit card might benefit
you or your situation, it’s advisable to
thoroughly research the card agreement before
taking possession. There may be a number of
different fees associated with using a prepaid
credit card, some of which might be high enough to
offset any benefits.
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