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Prepaid Debit Cards For A Tough Economy

Jan 31, 2008
The concept of prepaid cards is not a new idea in itself. It has existed in one form or another for a number of years through gift cards and phone cards. Applying the concept to a Visa or MasterCard has brought about opportunities that can benefit many people.

With most companies offering a 100% approval rating, a prepaid card is easily obtained and will not have any impact on your credit rating. This will help people who need to make purchases for goods or services on the internet, but are not able to apply for a credit card.

There are many possible ways a prepaid card can be used for internet purchases or offline purchases. If a retail outlet accepts a Visa card or MasterCard, the chances are it also accepts payment from a prepaid card.

How can a prepaid card benefit you?

The main benefit for all prepaid card owners is the fact debt cannot be accumulated. It enables people to shop freely with the amount of money they have loaded onto the card. Once the balance has been used up, there is no possibility to spend more unless additional funds are added.

Parents will be able to add money to a card for their children and not have to worry about them carrying cash or falling into debt. If the card does get used fraudulently, the cardholder is normally protected and would need to contact the card issuer to resolve any issues.

By using a card, a teenager will be able to learn to effectively manage their finances and improve their budgeting skills. The card may be used to top-up mobile phones, pay for travel expenses or even paying for the latest chart-topping CD or DVD. As long as there is a balance on the card, a teenager will be able to have full control over how they spend it.

"Prepaid cards have a number of benefits to parents and consumers. Control over spending is the largest benefit," says Peter Klamka, (http://www.myspace.com/peterklamka) an Ann Arbor, Michigan based consultant to the payment industry.

An additional benefit is that parents can authorize any relative or friend to add funds, so there is no need to send cash through the mail when wanting to send birthday money.

On top of this, no interest charges are applied to card balances and no penalties for late payment. People are free to top-up the card anytime they need additional money for a purchase.

There are two popular types of cards. The single use card which is also known as a gift card has a preset dollar figure at the time of purchase. One may or may not be able to reload these cards. The second type of card is a reloadable spending card. In many cases, these cards are purchased with no value at the initial purchase. Consumers are then able to add money to it. For the youth market, these cards can be tied to a parent's bank account. For the unbanked, most use Western Union or MoneyGram to add funds to their personal spending card.

Overall, although a prepaid card offers a convenient method of paying for things, it should be used responsibly and due care should be taken to store it even when all funds are used. If you have paid for something using the card, it may be required as proof of purchase.
About the Author
Jennifer Nast is a freelance writer based in London, England. She frequently writes on personal finance issues. She was an economist in The Citi before leaving to become a mother and writer. She can be reached at http://jennifernast.blog.co.uk/
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