One of the first plastic cards were credit and debit cards. Prepaid cards are considered the most recent addition to the plastic card family. Like its counterparts, prepaid cards offer peerless benefits that are hard to resist. For instance, it’s now considered the best alternative to carrying cash around.
Prepaid cards share many surface similarities with conventional plastic cards like credit and debit cards. However, there is one distinct feature that sets them apart from the others—they are not connected to bank accounts. As implied by the name, prepaid cards need to be preloaded with money before it can be used for any transaction.
In other words, you won’t be able to do purchase transactions (online or through merchants) and ATM withdrawals if there is no money loaded on the card. Since prepaid cards are not linked to any bank account, there is no risk of shady characters stealing your financial or personal information or data.
In addition, since you will need money to use the card, your spending will be limited by the balance that is available. This is a great feature as it helps ensure you won’t be able to spend more than you can actually afford. If the balance has been depleted, any transactions you will do using the card will be declined temporarily.
However, you can resume using the card as soon as money has been loaded successfully onto the card. Also, since prepaid cards are not linked to your bank or checking accounts, there is no risk of accumulating mounting debts that might take years for you to pay or recover from.
If you love to shop online, you would be delighted to know that prepaid cards can be your best ally. Since they are not linked to your savings account, there is no risk of others getting access to your bank or savings accounts in case your prepaid card gets compromised.
Shady characters can only access the balance that is available on the card and nothing else. For many, that’s a security feature many people find very enticing. Through the years, prepaid cards have become wildly popular because of their peerless and amazing features and benefits.
If you are considering getting a prepaid card, here are all the basics you need to know about this innovative financial tool:
Can prepaid cards help build credit?
The answer is no. As stated earlier, they are not connected to any bank accounts. That said, each time it is used, you will be using your own money rather than “borrowing” money from the provider. This means your prepaid card won’t be able to help you build credit.
If you want to build credit, you are required to borrow money and repay it back. The creditor will then report your payment transactions to the credit reporting agencies. However, this only applies to credit card transactions as you are using someone else’s money. With prepaid cards, you are using your own money.
Are prepaid cards easy to obtain?
The fact that it’s easy to obtain is one of the things that endear prepaid cards to many people. Obtaining a prepaid card is as easy as can be. No need to submit financial or personal documents. No need to fill out many application forms and no need to wait anxiously for days for your application to be approved.
Where can I use my prepaid cards?
Network-branded prepaid cards (the ones with the logo of the institutions they are affiliated with) are accepted and honored in establishments and by merchants associated with the issuer. Amazingly, most prepaid cards are also accepted by online merchants.