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Credit Cards vs. Prepaid Cards

On June 1, 2011, in Credit Cards, by KimberlyC

Credit Cards

Today we will discuss the advantages and disadvantages of credit cards vs prepaid cards, hopefully by the end of today’s discussion you will be able to make an informed decision about which option to choose.

Credit cards: Unlike prepaid cards, credit cards have a line of credit behind them. Typically you will be made an offer to accept a card in the mail, or you may decide to get a card by applying online. Many card companies also setup on college campuses and collect applicant data there. No matter how you get your card you will have an interest rate, if there is revolving credit. This has the advantage that you can make purchases now and pay for them later, but this can be very dangerous. Credit extended to you at high interest can be very expensive, and even low interest debt can be a problem if you don’t have a plan to repay the debts. Remember, never borrow money you can’t pay back, and never borrow for something that it would be more practical to wait for. Many people will get specialized cards with cash back or with rewards in order to maximize the benefit of using plastic. If you are a disciplined spender, this may be a very good choice for you to consider.

Prepaid cards work very differently. You open an account and you put money in the account in advance. You can then use the card just like a credit card at the store, but instead of increasing your debt on your line of credit, the money you put into the account is used instead. In this way they have the convenience of using plastic for your purchases, but without the worries over interest and increasing debt. This can be very helpful if you need an easy way to track all your spending as your online statement should show each individual purchase, and typically you will have the option to export this information into a format that can be used by various home accounting software suits, as well as Excel. One big disadvantage however, is that these cards do not help your credit score at all. Since there is no underlying line of credit there is no repayment as such and therefore no revolving credit item on your credit report. If you are trying to run money through a card to build your credit, a credit card would serve you much better.

For more information, go to prepaid cards at http://www.creditnowusa.com/Credit-And-Prepaid-Cards

Credit Cards vs. Prepaid Cards was last modified: December 20th, 2012 by KimberlyC
 

3 Responses to Credit Cards vs. Prepaid Cards

  1. Sal says:

    Great follower on this site, lots of your posts have definitely helped me out. Awaiting posts!

  2. Credit Cards vs. Prepaid Cards | UnsecuredBizLoan | visacredit.co says:

    [...] View original post here: Credit Cards vs. Prepaid Cards | UnsecuredBizLoan [...]

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