When credit card providers noticed that a huge portion of the population don’t have access to credit cards, they introduced one helpful innovation: the best prepaid cards. In some instances, credit card users end up defaulting on their payments and declaring bankruptcy.
The best prepaid cards function like a combination of checking and credit accounts. Also, just like most financial cards available in the market today, prepaid cards are typically backed up by popular and well-established financial institutions as well as bank holding companies.
However, unlike credit cards, money has to be loaded onto the prepaid card first before it can be used for purchase transactions (merchants or online) and ATM withdrawals. Once money has been loaded successfully onto the card, it can be used right away. The good thing is it is honored in most places where credit cards are accepted.
However, while using prepaid cards is the same as using credit cards in many ways, it has more in common with a checking account in terms of financial features. When used for purchase transactions or ATM withdrawals, the amount of the transaction will be deducted directly from the balance that’s available on the card.
All the Prepaid Card Essentials You Need to Know
Prepaid cards are seen as an effective and convenient solution for those who have very little knowledge about how banks work. They are also considered the best alternative for those who don’t have any access to banking services. For those with less than desirable credit scores, getting prepaid cards is the best option available.
Through the years, prepaid cards have also become wonderful gift options, thanks to the protection they offer against loss or theft. Many people are also opting to use prepaid cards compared to other alternatives like cash as they can be used for online transactions.
Taking into consideration all the enticing benefits using prepaid card offers, it’s not surprising that it has evolved into one of the most popular and fastest growing niches in the financial sector. A projection by the Consumer Financial Protection Bureau revealed that there’s a 22 percent rise in prepaid cards sold from 2015 to 2020.
Amazingly, the total amount loaded onto prepaid cards is also expected to double and will most likely reach a staggering $116 billion by year 2020.
Using prepaid cards offers many enticing benefits that are hard to ignore. For starters, using prepaid cards for purchase transactions (online and merchants) is a lot safer compared to carrying cash. Prepaid cards are also known for their worldwide functionality.
This can be attributed to the fact that they are associated with major financial institutions and networks. Prepaid cards are also considered by many parents as effective and awesome budgeting tools since they have no credit capabilities. That said, prepaid card users are spared from accumulating huge debts and paying costly fees and charges.
For those who travel constantly, prepaid cards are also considered the perfect travel companion. Apart from the very minimal cost (compared to credit and debit cards) of using the card, cardholders also have the option to only spend the balance available on the card. As soon as the balance is depleted, spending also stops automatically.
If the balance is no longer sufficient to cover the transaction, it will be declined. However, you can proceed with any purchase transactions or ATM withdrawals immediately as soon as you have successfully loaded money onto the card. Truly, prepaid cards offer ease and convenience that are surely hard to miss!