We have all heard of typical credit cards. However, there is another variant which calls into this same category known as pre-paid credit cards. The concept behind these cards is rather simple. As opposed to being provided with a line of flexible credit, these cards are associated with a fixed amount of money (sucha s 20, 50 or 100 pounds). Once these funds are depleted, the card will no longer hold any value until its assets are “topped up” once again. In some ways, we can think of a pre-paid credit card much in the same way as a pay-as-you-go SIM card. However, there is a bit more than meets the eye in terms of how these assets function as well as why they might be great options to keep in mind. Let's go ahead and take a closer look.
The Main Benefits of Pre-Paid Credit Cards
There can be several reasons why you might want to choose one of these cards. One common factor is if you plan on taking a holiday abroad and you hope to avoided bringing cash. As pre-paid cards require your digital signature as well as a PIN number, they are considered to be extremely secure.
Pre-paid cards can also help you to control your spending habits if you are known for depleting funds too quickly. This once again arises from the fact that you will not sacrifice your line of credit. So, the temptation to spend a great deal of money at any given time is dramatically reduced.
Pre-paid cards can also make great gift ideas for those who are difficult to shop for. As opposed to buying a present that may very well be returned, you can simply purchase a gift card and allow the recipient to spend the money as he or she wishes.
The Relevance of Credit Ratings
One interesting benefit of these cards is that they can help to boost a poor credit score. As the majority of pre´-paid cards are issued by major providers such as Visa and MasterCard, making payments on time and topping the funds up can help you to erase a bad track record. In fact, some will utilise pre-paid cards for this purpose alone.
What to Consider
There are a few factors to keep in mind when deciding upon which card is the most appropriate. Besides the limit that you will be provided, be sure to check out the interest that is charged to your account (commonly referred to as APR). This will impact how far your money can be stretched. Also, examine any terms and conditions such as additional fees or penalties for late payments. A final consideration is to determine whether your credit limit will rise if you make regular payments.
Pre-paid credit cards can be useful for a number of reasons. However, a good deal of responsibility should always be adopted in order to make sure that you utilise them in the most efficient manner possible.
