Prepaid cards are more than just reloadable gift cards that can be used anywhere major credit cards are accepted—they offer so much more than that. The following are some overlooked advantages of prepaid cards:
They can help control your spending
Maybe you’ve had traditional credit cards in the past and found that you always spent far more than you’ve intended, simply because that credit was available. Even shopping with cash can be somewhat risky, especially if you’re shopping with large amounts. Not only can it be unsafe to carry around large amounts of cash, but you might end up spending more of it than you initially planned. When you have a prepaid card, it can be easier to stick to your budget. For example, if you have a specific shopping budget for the month or you know the exact amount you’ll need for a purchase you’re about to make, you can load that amount onto your prepaid card. This can help eliminate any temptation to spend more, because you’ll only be able to spend what you load onto the card ahead of time. This is also a useful feature if you’re helping to support someone financially (such as your kid who is in college), and want to make sure they don’t go overboard with the spending.
Cheaper than banks
According to a report released by Consumer Affairs, the fees associated with prepaid cards are often still cheaper than maintenance fees that a consumer may have to pay by opening up a checking account. The report revealed that the average prepaid card user will spend less than $7.50 each month in fees, compared to bank account holders.
There are certain incidents when a credit or debit card might leave your sight as you pay for something or settle a bill—for example, at a restaurant. With data hacks and security breaches, online shopping can also be somewhat risky. If you use a debit card for these things—a card that is linked to your bank account—the financial loss can be devastating if your information ever falls into the wrong hands. But if you’re planning on shopping online or visiting a restaurant, you can just load what you know you’ll be spending onto your prepaid card. If someone does steal your information after the fact, you likely won’t have much (or any) remaining cash available.
From making reservations to bringing money with you for your expenses, prepaid cards are also great for travel. As mentioned above, they offer terrific safety benefits and they can help you limit your spending—two very important things to consider when you’re about to go on a vacation.
No interest charges
Even if you do qualify for a traditional credit card, you won’t be able to find one that doesn’t charge interest (with the exception of a limited-time introductory period). With a prepaid card, you don’t have to worry about spending more by paying for high interest charges each month.
No credit considerations
It doesn’t matter if your credit is bad or if you don’t even have credit—prepaid cards are available to all consumers, regardless of their credit history. In fact, when you open up a prepaid card, your credit isn’t even taken into consideration and no credit checks are run. Because the money you are spending is not a loan and simply what you load onto the card, your credit history is irrelevant and you won’t have to worry about getting into debt by making charges that you won’t be able to pay back. And because there is no credit check involved, the process is also much faster. At JG Wentworth, we make it easy and convenient for consumers to open up their prepaid card by filling out a quick online form.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.