Prepaid Credit Cards Could Be The Answer

Posted by DrorKlarIdn

April 12, 2008

Does your teen want the convenience and social status associated with having a credit card, but you are not sure they are ready to handle the responsibility? Consider letting them have a prepaid credit card and allow them to learn to manage their money on their own. Or if you are needing a lesson on managing your own money, they might be a good idea for you, as well.

There are a lot of reasons to consider a prepaid credit card over a traditional one, since there are a lot of advantages to a card that already has a paid balance. We will go through the advantages first, then the few disadvantages.

One of the main perks of having a prepaid credit card is the fact that only the amount that you put on the card can be spent. It is like using a debit card, except you only have access to the money on the card and you cannot become overdrawn. Since you cannot spend more on the card than you have credited to it, there will be no chance of an overdraft fee.

Another advantage is that if you lose the card, the only thing you will possibly lose is the amount of money that was credited to the card instead of the thief having access to your card’s line of credit or your checking account’s balance.

There is generally an application fee for acquiring the card, though, and sometimes there is a monthly fee associated with using it. This is likely cheaper, though, than the interest and possible overcharge fees that a teenager could run up on your card if given to them without any kind of card-enforced spending limit.

Another disadvantage of prepaid credit cards is the fact that you cannot earn any kind of reward points for using the card in most situations like you can with credit cards. This will not be an issue with most people who will require a prepaid card, though, since they are typically more worried about not going over their spending limit than they are worried about earning reward points. Reward point programs on credit cards are generally for people who are more free to spend money here and there as they please and not so much for people on a strict budget. If you are on a tight budget at home or simply want to give your kids a lesson in using credit wisely, a prepaid credit card is the way to go.

Dror Klar is a writer in the field of finances and is currently assisting those in need of cash advances and payday loans.
http://www.jtvcashadvance.com
http://www.jtvcashadvance.com/newyork.html

Personal Finance