A prepaid credit card can be used like any other credit card to make purchases. With a prepaid card, you can load funds onto your card and use that money to make purchases and get cash -- you are not borrowing money from a bank or other financial institution. The prepaid credit cards look, feel and work like a credit card but are pre-funded "stored-value" cards. This allows you to set spending limits for you or your kids.
Who needs a prepaid credit card?
1. Budget: conscious people-People who want to limit their spending limit.
2.Parents: Parents who want to teach teens how to create a budget, manage money, and shop wisely.
3.Students: Teenagers who don't have budgeting skills yet.
4.People with bad or no credit history: People with damaged or no credit history.
5.People looking for an excellent gift idea: Gift receipients enjoy freedom of their choice.
The prepaid credit cards can be used for:
1. Purchases
2. Money management for young adults
3. Travel including reserving a hotel and rental car
4. Emergency needs
5. Cash access at ATMs
6. Employee wages & expenses
7. Electronic payments
8. Gift-giving
2. Money management for young adults
3. Travel including reserving a hotel and rental car
4. Emergency needs
5. Cash access at ATMs
6. Employee wages & expenses
7. Electronic payments
8. Gift-giving
How does a prepaid credit card work?
It is a pre-paid, reloadable card can be used anywhere Visa or MasterCard is accepted -- at stores, gas stations, restaurants, theaters, in the mall and online. Making a hotel and rental car reservation is a snap. You can also access cash at ATM's. The card is great for everyday purchases, special occasions, and emergency back up.
Unlike a credit card, though, each purchase is deducted from the pre-paid balance on the card. Best of all, because it's not a credit card, there are no finance charges, no late fees, and no accumulation of debt. Beside that, it also accepted anywhere a Visa or MasterCard is accepted, can be used to withdraw cash from an ATM and relodable.
Why do you want to use a prepaid credit card?
a) Safer than cash
When cash is lost, it is gone forever. However, if your prepaid credit card is ever lost or stolen, you're protected by Visa or MasterCard's no liability policy.
b) Budgeting
You set the spending limits by the prepaid amount loaded on the card. Prepaid credit cards make it easy to get your spending under control and shop wisely.
c) Teaching tool
Parents can sign up for their teens: they set spending limits by loading the card with a certain amount of money and monitor where their children are spending it. Prepaid card meets the spending needs of teens and helps develop responsible financial behavior. With online tracking of purchases, parents and teens can discuss spending and budgeting.
How is the prepaid credit card different from regular credit cards?
The prepaid credit card looks like a credit card - it has the Visa or MasterCard logo and hologram -and allows the convenience of cashless purchases like a signature-based credit card, with no PIN input required at the point-of-sale. However, it does not have a "line of credit" because it accesses pre-loaded money. You load funds onto your Card and use that money to make purchases and get cash - you are not borrowing money from a bank or other financial institution.
Two Types of Prepaid Cards: Open and Closed -System Prepaid Cards
The popularity of prepaid credit cards is rising. Visa and MasterCard are issuing prepaid, or pre-denominated, stored-value cards, as they're called, that can be used anywhere Visa or MasterCard are accepted. There are two types of prepaid cards: Closed-system and open-system prepaid cards.
Closed-system prepaid cards are those issued by and redeemable at a single merchant (or merchant chain). Closed-system retailer gift card programs focus on a single application: providing a prepaid card product to consumers solely for making purchases at a single merchant or, in some cases, a group of retail merchants.
The open-system network is differentiated from the closed-system network by the fact that open-system prepaid cards are branded by a payment card network. Network branding makes it possible for open-system prepaid cards to be processed using the same “tracks” as traditional debit and credit cards. As a result, these branded prepaid cards are accepted at any merchant that accepts the network brand on the card. For example, a Visa-branded prepaid card can be redeemed by its holder at any merchant that accepts Visa-branded debit cards.Open-system gift cards are issued by a third party, such as a bank or money transmitter, and carry the brand of a card association or other payment network. They can be used at any merchant that accepts the brand on the card.
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