All About Prepaid Credit Cards By FederatedCreditCards.Com Copyright © 2008

Over time prepaid credit cards have become a more accepted form of payment; not only do they help those with bad credit or no credit to learn more financial discipline, but they're also great for kids, because it's impossible to spend more money than has been put onto the card. Over the last few years prepaid credit cards have become much more accessible to consumers. Read the lists of advantages and disadvantages to prepaid credit cards below to decide if this option is right for you.

Advantages

1. Owning a prepaid credit card to make purchases doesn't limit the kinds of purchases you can make or shopping venues you may use. You can spend funds on a prepaid credit card in the same places you can spend funds on a standard credit card, without worrying about extra fees, or any other form of red tape.

2. Prepaid credit cards teach money management, whether the lesson is intended for adults with blemished credit history, or to teenagers experiencing the rules of responsible credit management for the first time. With a prepaid credit card, those with bad credit don't have to worry about spending money they don't have, and parents don't have to worry about teens spending more money than they were given.

3. Some prepaid credit card issuers are committed to establishing long term relationships with their customers. Which means that you can use a prepaid credit card as a stepping stone towards getting a limited unsecured credit card, and then eventually, a standard credit card with a higher line of credit. Provided of course that you pay all the necessary fees, and maintain a positive relationship with the card issuer.

4. Prepaid credit cards are often more convenient than a standard checking account because there's no need to worry about bounced checks, or overdraft fees. If there is no money on the card, then the purchase will be declined right there; embarrassing, but not as costly as it might have been with a credit or debit card. In some cases, a banking account may not even be necessary for getting a prepaid credit card.

5. Acceptance is guaranteed, by almost all major prepaid credit issuers. The only prerequisites necessary are being 18+, paying the set-up fees, having money to load onto the card, and in some cases, a bank account. Prepaid credit card applicants will not be discriminated against because of credit history.

Disadvantages

1. In recent years, prepaid credit cards have become more like standard department or retail store gift cards, --they can be bought, and loaded right at a store counter, and offer no opportunities for further credit advancement. It's important to select a prepaid credit card plan that will continue to provide you with opportunities to improve your credit.

2. Prepaid credit cards do not allow you to spend money that you don't have, --which can be a double-edged blade. Although in most cases, if you have bad credit, it's probably more to your benefit that you don't have access to a large line of credit, it can be inconvenient, and a shocking surprise if one wasn't already aware of the fact.

3. Various fees can be a disadvantage to many prepaid credit card users. If you're not using a prepaid credit card purchased from a retail store or a department store, then it might be prudent to expect to pay certain fees. Some examples are maintenance fees, processing fees, set-up fees, annual fees, and possibly more. Because of the wider availability of prepaid credit cards however, there may be less than you expected. It's always safer to ask ahead of time.