Prepaid Credit Cards

A prepaid credit card relies on initial deposit to be activated. This is because the amount that you deposit will also be the same fund that you use in making purchases with your prepaid credit card. This means that you are not borrowing any amount of money from your prepaid credit card company. The money that you use is your own. This type of card works if it has some stored value within and if it is pre-funded. Prepaid credit cards differ from debit cards because unlike the latter, prepaid credit cards are not included with either savings or checking account.

As this is so, your prepaid credit card will not gain any interest. You will not also receive monthly balance statements stating how much you owe from the card company. As long as it is properly funded, you can go on using your prepaid credit card.

In addition, a prepaid credit card can also be used anywhere as long as the merchant store accepts Visa and Mastercard payments. This card is suitable for people who want to set limits for their spending, like students for example. This type of card is also safe to use. In the event that it gets lost or stolen, you will not be held liable in anyway under Visa and Mastercard policies.

Prepaid credit cards are mainly used to enhance money management skills. Apart from this, it can also shoulder expenses for flight and travel accommodations, salaries, electronic payments, and even for emergency purposes. Aside from these, this type of card can also be used for accessing ATM’s.

There are two kinds of prepaid credit cards—the closed system and the open system. Closed system cards are issued by only one merchant chain and are likewise redeemable only at that particular merchant chain. On the other hand, open system cards are the usual prepaid credit cards issued by different banks and it can be used to purchase items from different stores and merchant outlets. However, they are not held as exclusively as closed system prepaid credit cards are.

For additional information on credit cards or related topics please visit our library of credit card articles.