Prepaid cards are altogether different from traditional cards, though they might present a log of Visa, Master Card, Discover, or American Express. These prepaid cards allow the users to spend only based on what they have deposited into their cards. They are a great substitute for cash and traditional credit cards, but they have some drawbacks. With the Prepaid Visa Card, you spend your funds unlike the credit card system, where the money is lent by the banks. The process to obtain these prepaid credit cards is convenient and also, they do not ask for any credit check. The prepaid credit cards can be utilized online when you are not able to make the payment via cash, but it would not enhance your credit score. It is also a great option if you are trying to save money.

How does a prepaid card function?

They almost work like a debit card; with every transaction, it deducts the balance, but the only difference is that they are not tied to the bank account. Some prepaid cards grant the leverage to withdraw cash from an ATM, but it has a limitation, that one can withdraw up to the available amount in the account. Some cards give the facility to add money to the card multiple times. On the other hand, some do not come with the same. Traditional credit cards have higher chances to drag you into debts, but these prepaid cards would hardly make you go into debts as they will not allow you to exceed the amount loaded on them. Those cards, that may let you go over the limit, would charge an overdraft fee. It is crucial to keep in mind that one can go over the limit if he or she has a low balance and another card fee puts that person in red.

Different types of Prepaid Cards:

Open Loop: This category is branded with the logo of a network, such as- American Express, Master Card, Visa, or Discover. This comes with the advantage that it is accepted anywhere.

Closed Loop: You could utilize the card in specific areas, for example, a particular store, or a group of stores. Mostly, the employee provides open-loop cards to the employee to grant pay and also more conveniently. Some employees also offer an option of having payroll passed to unbanked employees through prepaid cards. These are referred to as payroll cards as well. Government agencies also utilize open-loop cards to attract benefits like unemployment insurance.

Advantages of Prepaid Credit Cards: 

These credit cards help you take a break from unnecessary spending. These work as a great tool to help consumers to stay within their financial limitations. These cards are useful in controlling expenditures and managing them. It helps consumers to set a particular budget for a specific expenditure, as there are higher chances of getting stick in comparison to those with a bank or credit card account. A card is a good option for those who can’t get approved because of poor credit. Also, these cards are more secure than cash. Having prepaid cards helps to get access to cash without the need to carry a wallet.

Disadvantages of Prepaid Credit Cards:

The disadvantage is that if you don’t get the card registered, you may have to face certain limitations. Before utilizing the card, you need to get it registered with all the features. If you are unable to do so, you would not be able to add more money to it, utilize it online, or withdraw funds from an ATM. The cards come with fewer rewards potential. Also, the other disadvantage is that they are not always accepted. The cards are only accepted at places, wherever the credit cards are utilized.

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