Ever been short on money when you really needed it? Have you been in a situation where you rued and vied for not having a credit card? Afraid of keeping a credit card since you fear that you might actually end up spending more? If the answer to all these question is yes, then you need to go in for a prepaid credit card. It is just like credit cards- you swipe it at the malls, airport or while making a hotel reservation, without using any cash- but with a difference.
As the name suggests, these credit cards are prepaid. These come loaded with cash and work more like debit cards. In fact, you will not have to worry about overspending using a prepaid credit card because you would already have paid a limited amount of money to the credit card issuer for loading into your card. Expenses are therefore limited in the case of prepaid cards.
Prepaid credit cards work in a simple manner- you just reload money into the account, and use the card. Every time you make a purchase, a part of the balance is deducted from your card and you are free to spend the remaining balance for all future purchases. Once all of the deposit in your prepaid card is exhausted, you will have to refill it in order to make more purchases. For instance, if you have topped you credit card with $500 and book a room worth $200, you will be left with $300 to spend. Once this $300 is also exhausted, you will have to recharge your prepaid credit card with an amount you think you might need. Thus, the whole concept is great for those who need to limit their credit card expenses and spend within a fixed monthly, bi-monthly or annual budget. This type of plastic is great for saving some cash!
The flip side? There are a whole lot of fees associated with prepaid credit cards. With an activation fee of about $10 and a fee associated with almost every transaction you might make (including consequent refillings), prepaid cards are more expensive than the traditional credit cards. All the fee money is deducted from your balance and this leaves you with less money to spend on your purchases. The good thing about prepaid is that you can get your hands on a prepaid card regardless of the defaults you might have made with your past credit card issuers. Using a prepaid card, however, will not boost your credit scores since you are not repaying the money per say- you are simply using the money that you have paid in advance (which is termed as debit, not credit).