How does a prepaid credit card work? Is it worth having a prepaid credit card? There is no secret to the uses of a prepaid credit card, you deposit money into the card, such as a gift card. So as you use your prepaid card, the value of your purchases is deducted from the balance. As you make purchases, your available balance is reduced.
Is Prepaid Credit Card Worth It?
Say, for example, that you deposit $ 200 on your prepaid credit card. After paying $ 150 for the rental of a vehicle, you get $ 50 to spend. After using your entire balance, you should recharge with more money on your prepaid credit card before you can use it again and so on for the rest of your life while you use the plastic.
It depends! In comparison, an unsecured credit card or traditional card that provides a credit limit for you to use as you see fit within your purchasing limit. You have the option to repay your purchases bit by bit, or wait for the one-time invoice with about 30 to 45 days to pay. When comparing the two models, the prepaid is insignificant.
Are you thinking of getting a rechargeable prepaid card? Join the club. Since 2015, more than half of Brazilians are subscribing to prepaid cards for personal use, this growth is due to the fact that half of the population is also restricted in the financial system and can not adhere to bank and financial cards that require analysis and consultations with SPC and Serasa for approval.
There are more than a dozen prepaid types on the market right now, and many variations that can make them a good or terrible choice. Here are the nine things you need to know about prepaid cards in general.
1. Prepaid cards are more like debt than credit
Prepaid cards look like credit cards and spend like credit cards, but there is no credit behind them. They are technically debit cards – when you use them, you are spending your own money and not borrowed or guaranteed money from the bank.
Unlike traditional debit cards, however, you do not need a bank account to use a prepaid card. You just load your reales directly into it and then use that balance to make purchases. When the balance on the card runs out, you recharge with more money.
Because prepaid cards are associated with large card networks – Visa, MasterCard, American Express, Dinners and Discover – they can be used anywhere in the world. With the cards you can: buy groceries, spend with your car, pay bills online etc.
2. Prepaid cards are an alternative to banks
For the millions of people in Brazil without a checking account, scenario that is now changing thanks to digital accounts, prepaid cards offer the facility of buying based on cards without the problems of dealing with a bank.
You can use prepaid cards to book a hotel room or rent a car (not always). They even come with numbers from a digital checking account, which means you can make payments and transfers directly on your card.
3. Prepaid without consultation for negative
Prepaid cards were originally designed for people who are negative and restricted in name, meaning with poor credit history. Either way, they remain an excellent choice for people with credit problems.
It is impossible to spend beyond your balance with a prepaid card – the card has no limit. Then, when the money deposited in it ends, you have to for more to use it. This template has become a very useful card solution for teens or for those who are recovering from debt and intends to build their credit again.
The vast majority will not require credit checking, but it will also not help you create credit, since spending on this type of prepaid card is not tracked by the credit bureaus, only by their issuers.
4. Look for a prepaid that meets your needs
Some prepaid cards allow you to pay bills online, even set up automatic monthly payments. Some will issue wire transfer payments issued by the card company and / or allow withdrawals from ATMs using a special password.
You can manage your account online either through the computer or through a mobile app. A recent survey found that seventy percent of general prepaid card users use their mobile phone to check balances and transaction history and receive text alerts.
5. How to recharge the prepaid with cash?
If you need to put more money into your card, you have five options:
- Transfer money from a bank account or financial institution.
- Transfer money from another prepaid card to your prepaid card.
- Transfer money from a PayPal account or similar.
- Recharge by making direct deposit of bank boxes.
- Issue ticket for single payment.
In other countries there is still the recharge card mode that works like a gift card: it contains a code number that becomes tied to the amount of money you paid for, but that’s another subject.
6. Attention with the rates, costs and charges of the prepaid cards
You do not pay interest on a prepaid credit card like you do with a traditional credit card. Instead, you will find rates, fees and extra costs that will often be literally hidden from your eyes and understanding.
Unlike common credit cards , which by law must disclose their terms and conditions in advance, I do not know here in Brazil no regulations require the prior disclosure of rates on prepaid cards. In general, following Brazilian custom, many of the fees applied on prepaid cards have not been fully disclosed.
Prepaid credit cards charge fees for everything from setting up (plastic shipping) to recharging. The good news is that, through benchmarking, consumers can limit rates by asking for cards with lower or exempt costs for some services.
Currently most major banks have low cost prepaid card options just contact your bank to find out more information. American Express prepaid cards are essentially free.
Some cards charge extra fees for special transactions such as overseas use or automated bill payment, and most charge when you make withdrawals at the out-of-network ATM (24-hour bank). Fare costs vary so it is important to read the disclosures.
7. Choose what your prepaid credit card will be
The prepaid sector has expanded in recent years and as competition increases, consumers are having more options. Today there are prepaid cards with benefits focused on specific lifestyles, with more incentives, and even with rewards and cash-back programs.
8. Use prepaid card to manage your money and finances
Even for people with a regular bank account, a prepaid card can be an effective budgeting tool. Charge your monthly shopping budget on a prepaid card and use it strictly in the supermarket; When the money is up, your expenses automatically stop.
Many rechargeable prepaid cards have their overall purpose is to help consumers manage expenses, and to limit costs and risks.
9. Your money is protected on a prepaid card
Although prepaid cards in theory are developed as an alternative to banks, even those that are not issued by a bank, offer zero liability protections. If you report the loss or theft of a prepaid card to the issuer, most will restore your original balance and issue a new card within a few days.
In other words, a prepaid card works like a debit card, it can be practical and beneficial to some and not to others, it will all depend on your customer profile and lifestyle.