December 21, 2009
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Prepaid Credit Cards Get All The Credit, Pt.1
The stigma of bad credit.Prepaid credit cards are becoming increasingly more popular mostly due to the stigma of bad credit being removed. Consumers have discovered that prepaid cards are a way to monitor spending and stick to a budget. In an interview with the Gaston Gazette in North Carolina, Kirsten Trusko, President and Executive Director of the Network Branded Prepaid Card Association provided insight into the prepaid card. She begins by defining what a prepaid credit card is. It looks like and functions the same as a traditional credit card. However, unlike the traditional card where the cardholder spends first and pays later, the customer front loads the prepaid card account with a set amount.
Although prepaid credit cards have the word credit in the name, in actuality, they do not have a line of credit. The amount the cardholder is able to spend depends solely on the amount he has deposited into the card account. There is no threat of going over the limit and therefore, no possibility of over the limit penalties. There are several reasons why individuals would use a prepaid credit card. Some employers will issue them as paychecks to employee without a bank account. Individuals, who shop frequently on the internet, use prepaid cards for added protection against identity theft. Since the cards are not associated with any bank account, they would be worthless to an identity theft.
Prepaid credit cards are an excellent way for parents to give their teens allowance. It's also a good way to teach your children how to budget their money and monitor spending. Seniors love to use prepaid cards because it helps to keep them on track with their budgets especially for those living on a limited income. Because there are no overdraft fees or debt accumulation, families love these cards to help them budget properly and make easy purchases for food, gas, and clothing.