The popularity of using a credit or debit card has increased tremendously and those who do not have either of the cards find it difficult to operate in a society where most of the transactions are dependent upon electronic payment forms. There are many people who do not have a bank account and are referred to as unbanked. Fortunately, for such people there is an alternative through which they can handle their financial responsibilities. These cards are termed as prepaid cards.
These cards can also be referred to as prepaid debit cards or prepaid credit cards. Whichever term is referred to, these cards serves as a means of electronic payments. The benefits offered on these cards are somewhat similar to that being offered on other cards.
Through prepaid cards, you can purchase goods and services through the web, phone or in-person. If you are using these cards for in-person transactions, there are two options for making payments - debit or credit. The credit way will require you to provide an ID proof and signature whereas; the debit option will require you to have a pin code. Prepaid cards are also used for withdrawing money from ATM as well as from selected merchants.
Similar to that of a checking account, the money deposited is kept safe in a FDIC insured account. As you deposit more money in the account, the card will show the balance available in the account. The difference between prepaid cards and credit cards is that you can spend only the amount deposited in the checking account and no credit will be offered. This eventually means that you will be paying no interest charges and is useful for those who face issues in paying of credit money.
The popularity of these cards is increasing immensely since obtaining them is very easy. When you apply for a credit or debit card, the card issuing company will check your credit history and if it is strong, you will be qualified to get a card. In case of prepaid cards, the applicant can obtain the card even if their credit history is not so strong.
Prior to such cards, customers used to go for check cashing centers so as to handle all their financial requirements like paying bills. Although, there are many benefits associated with such services however, there are various drawbacks as well. Customers were required to wait in long queues for paying bills or they have to pay high fees for check cashing. By having these cards, the cardholders can perform any type of transaction in a convenient manner and with lesser cost.
Some considerations which are important when applying for prepaid cards are mentioned as follows:
-Find the cost of the card. Whether they are free or are charged? If charged, what are the rates?
-What are the monthly charges of using the card?
-How long will be the card valid for making purchases?
-What are the loading fees of the card? Most cards offer these services for free.
-What are the charges for contacting customer services? Many card issuers offer these services for free whereas, others charge a nominal amount.