If you’re not familiar, you can easily mistake the best prepaid cards for other plastic cards. This is not surprising however since prepaid cards share a lot of surface similarities with credit or debit cards.
In addition, the best prepaid cards also share some of the features that make other plastic cards enticing. For instance, just like a debit or credit card, prepaid cards can be used to pay for hotel reservations, car rentals, hotel bookings, and other online purchases.
What’s even better is obtaining a prepaid card is easy and hassle-free. In fact, even if your credit standing is less than desirable, you can still easily get your hands on a prepaid card if you so wish.
Best Bank Account Alternative
A whopping 68 million people don’t have access to a bank account. And that’s in the United States alone. Fortunately, thanks to prepaid cards, they can still perform some of the typical transactions other people with bank accounts or other plastic cards can do like purchase transactions (online and through merchants) as well as ATM withdrawals.
How Prepaid Cards Work
Before a prepaid card can be used for any transactions, money has to be loaded onto the card first. Purchase transactions as well as ATM withdrawals you can do will depend on the balance available on the card. The amount of purchase transactions and withdrawals will also be deducted directly from the balance that’s available on the card.
That means if the amount of your purchase or withdrawal is greater than the balance available on the card, your transaction will be declined. If the balance is insufficient for your transactions or if your balance has been fully depleted, you need to load money onto the card before you can use it again.
Managing your prepaid card is more similar to managing your checking or savings account than managing a credit or debit card. Just like a savings account, you won’t have to worry about finance charges, late payments, due dates, or minimum monthly payments when using your prepaid card.
Also, unlike credit cards, you don’t have the option to “borrow” money from the issuer. Your spending limit is limited to whatever balance is available on your card. When you use a prepaid card, you are also spared from revolving debt balance, costly interests and charges, and putting your credit score at risk.
In some ways, prepaid cards also resemble debit cards since all transactions are deducted from the available balance. Any amount spent or withdrawn is not deducted from any bank account but from the available balance on the card.
Ideal Prepaid Card Users
Prepaid cards are ideal for many people especially those who have no access to banks. For instance, parents who want to teach their children how to manage their money accordingly use prepaid cards. Some parents provide prepaid cards to their children and load whatever money they need on the card so they also won’t have to carry physical cash with them.
Those individuals with bad credit can also get their hands on a prepaid card if they want as their credit standing won’t be looked into. In addition, a prepaid card is the best option for those who don’t want to put up with the hassle associated with bank account or credit card applications.
When you apply for a prepaid card, you are not required to submit any financial or confidential information. This is especially helpful if you don’t want to put any of your financial or personal information at risk of getting compromised. Also, if you’ve made financial mistakes in the past like not paying your credit card bills on time, your chances of getting a card is slim to none.