There are many reasons why you may be looking into a good financial solution and the chances are you will come across prepaid credit cards on more than one occasion. Prepaid credit cards can be very beneficial to any individual and here we will help you understand how these cards work and how you can use one to your advantage.
So what exactly is a prepaid card and what is its purpose?
Prepaid cards are very similar to a regular credit card provided by your bank or chosen card vendor however they eliminate some of the key problems with today's credit card industry. When you here the term pre paid it generally refers to some form of upfront payment and that is exactly what it required for us to take out a prepaid card.
When you apply for a card it is almost guaranteed to be accepted which is far from what can be said with a regular card. You may ask yourself why this is so, and the answer is because of the nature of the card; with a standard credit card as soon as you use it you are in debt to someone else and standard credit card companies typically turn down applicants who they believe will be unable to keep up with repayments and charges causing them to lose money this is usually people with a bad credit rating or previous credit card problems. As mentioned above to get a prepaid credit card you must pay into the account prior to its use, which means technically the card vendor owes you money, the opposite of a regular card. This eliminates the need for the company to run a credit check on you as you will never, in theory, owe them any money, making this a great solution for anyone suffering with bad credit. Another great thing is that prepaid credit cards can be used for anything that a normal card is used for and nowadays a credit card is required to do certain things that may be required for anyone such as booking a hotel or hiring a car.
Although with this type of card you will avoid major monthly bills and crazy interest rates, you do not escape fees all together as the vendor needs to make a bit of money somehow. Generally there won't be many fees associated with a prepaid card but ones you will typically find are a set-up fee and a monthly charge. Set-up fees will be a small amount you pay prior the being able to pay in and use your card, it shouldn't be too expensive and once this one of payment has been made you are free to use the card. Monthly fees are usually at a set rate (be sure to check this out before you sign any agreement), this charge will not be based around how much money you have in your account or the amount you have spend in the charge period.
The good thing about these Prepaid cards charges compared the corresponding charges of a regular card is that they are fixed and you will always know the amount you are paying at the end of the payment period. If you buy an item for £1000 you will not be charged 20% interest and you will not pay interest on your account balance because you should never be in negative credit.
For those of you who are interested in learning more, take a look at Prepaid Credit Cards
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