When is prepaid credit card the wrong product?
A reloadable prepaid credit card is really a debit card that works like a credit card. You pay in advance and can spend only as much as is available on the card. Prepaid Visa and MasterCards are available and offer the same type of protection as credit cards, without the finance charges. There’s nothing wrong with a prepaid credit card, but it’s not the best product for everyone.
#1: You can get a credit card, and can pay your bills on time
Prepaid cards charge higher fees than credit cards - as long as you can pay your credit card on time and don’t have to pay finance charges. If you’re afraid you’ll go overboard, then a prepaid card is right for you. But if you can get a credit card and know you won’t go overboard and will always be able to pay on time, you should to consider a credit card. And even though prepaid credit cards have high fees, they aren’t predatory like check cashing.
#2: You can control your spending
Prepaid credit cards only let you spend as much as is on your card (and beware of those that let you go over and charge you NSF fees). If you have the discipline to stick to a budget go with a credit card. If you need someone to make sure you stick to your budget, go with a prepaid credit card.
#3: Few Rewards
Few prepaid credit cards offer rewards. Lots of credit cards offer rewards – free tickets, cash back, gifts, you’ll be able to find something if you look around. But you’ll have to look real hard if you want a prepaid debit card with rewards.
#4: You could earn interest on your money
Prepaid credit cards rarely, if ever, pay interest on your deposits. With credit cards, you pay after you’ve made your purchase and could some interest by keeping the money in a bank. It may not be much, but it may help.
#5: You want to improve your credit score
Some cards claim to help you improve your credit scores. While debit cards normally don’t hurt your credit score, they don’t help much either. If you’re thinking of a card that promises to improve your credit ask what they report and which bureaus they report to.
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