Prepaid Credit Cards 101 - What You Need To Know
Once upon a time, prepaid credit cards (which are, technically, debit cards) were considered to be sort of "lower class" - the only thing available to young people and those with bad credit. Well, those days are long gone, and with very good reason.
Many people are now finding that prepaid credit / debit cards meet so many needs. The sheer numbers of cards now available are a testament to their popularity and growth in the market.
From a pure financial standpoint, prepaid cards offer the convenience of a credit card with none of the associated expense or risk. There is no interest on purchases and no risk of building debt. These features make the prepaid cards perfect for teens and college students whose parents want some control over spending, but do not want to have to be involved in each individual purchase. Increasingly, people are finding that the prepaid cards are also perfect for aged parents and loved ones - the cards give the seniors real financial freedom, but limit them from making judgments errors that might have harsh financial effects.
The security that prepaid cards offer is another attractive feature for many. While a checking account debit card is handy, it is also a direct link to the card holder's checking (and, very often, savings) account. A prepaid card completely eliminates that connection. This makes these types of cards far more attractive for Internet shopping, phone orders, and even face to face transactions. Think of the reports of waiters and cashiers who have devised methods to record debit and credit card information! The marketing effort behind the prepaid credit and debit cards that we see today is massive. There are many different types of cards available, directed to very different demographic groups. The Baby Phat card, for example, is directly aimed at the female hip hop generation user, while the Muchmusic card is directed at the young music lover who frequents that web site. There are a lot of retail store based promotions, such as the CVS and GreenDot cards, which are pretty straightforward in their approach to the business, providing a no-frills option to the customer who just wants a fast and simple solution. There is also a wide variety of bank-issued cards (such as Vaya, Worldpoints, and Homeland) that are really blurring the line between the prepaid card of the past and what we think of as credit cards, with reward programs, different levels of cards, secured transactions, and other perks. The prepaid cards are accepted worldwide by merchants who accept Visa, Mastercard (and, increasingly, Providian and Discover) and look and work exactly like any other credit card. Most of the prepaid cards also allow for ATM withdrawals and PIN-based transactions. The prepaid card market has become much more competitive, which is great news for consumers, since many are now offering fee-free fund loads, caps on transaction fees, lowered or no monthly fees and competitive application fees.
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