Through the years, prepaid cards have become very popular. As a testament to its popularity, a Pew study revealed that usage of prepaid cards rose by over 50 percent from years 2012 to 2014. Since prepaid cards were first introduced, they have become one of the favorite payment methods especially by those who don’t have bank access.
In a short time, prepaid cards have also become quite a favorite among the picky millennials. Undeniably, this speaks volumes about the massive appeal of prepaid cards. Today, many people consider them the perfect alternative to conventional banks. Many users also prefer them over other plastic cards.
Get to Know Your New Prepaid Card
If you are like most people, it is very likely that you already have a prepaid card or you are considering getting one. Unlike other plastic cards, prepaid cards don’t need to be linked to a savings or checking account. As the name implies, prepaid cards need to also be preloaded with money before it can be used.
In addition, unlike traditional cards like credit cards, prepaid card users won’t be using the money of the provider or another party. Instead, prepaid card owners will be using their own money — the money that was preloaded in their card. This makes prepaid cards the best option for those who would like to manage their money accordingly.
Gift cards are also considered prepaid cards. However, unlike the traditional prepaid cards, gift cards are designed for one time use. On the other hand, reloadable prepaid cards can be used repeatedly. Also, as mentioned earlier, they need to be preloaded with money before they can be used for purchase and withdrawal transactions.
Using Your Prepaid Card
Just like debit and credit cards, prepaid cards can be used for online and merchant transactions. Reloadable prepaid cards are also associated with popular and established financial and credit institutions. This means they are honored and accepted in establishments that are associated with the network they are affiliated with.
Each time the prepaid card is used, the withdrawal or purchase amount will be directly deducted from the available balance in real time. This also means any transactions — purchase and withdrawal — tractions will be limited by the balance available on the card. As soon as the balance has been depleted, you won’t be able to use the card.
Fortunately, you can readily use the card as soon as you are able to load money onto the card successfully. Thankfully, there are several easy options to load money onto the card. As soon as the money has been loaded successfully, you can immediately use the card for withdrawal or purchase transactions.
Prepaid Cards Vs. Credit Cards
Although both plastic cards can be used for purchase and ATM transactions, they have some distinct differences. Case in point: when you use a prepaid card, you need to reload money onto the card first before you can use it for transactions. When using a credit card, it is the exact opposite.
Credit cards are not preloaded with your own money. The issuer will be paying for the withdrawal or purchase using their own money and users won’t need to use their own money for purchase or ATM transactions. In a way they will be “borrowing” money from the bank or the prepaid card provider.
Also, transactions done using a credit card can be likened to a “loan” since you will be paying the amount at a later time (in some circumstances, with interest). Since it is considered a loan, your transactions will also be reported to consumer credit bureaus. Prepaid card transactions won’t be reported.
