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Your Take: Prepaid Credit Cards
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I’ve been thinking about the idea of prepaid credit cards for a little while now and I’m not entirely sure why they exist or why people use them. Prepaid credit cards often have a ludicrous number of fees such as an application or account opening fee, a monthly maintenance fee, reload fees, etc. and I only see one benefit to prepaid credit cards – the fact that you don’t have to carry the cash with you.
In looking at a bunch of fees, the lower application fee I found was around $10 and the lowest monthly maintenance fee was around $5 – that’s $10 down and $60 a year just so you don’t have to carry cash around. When you consider the cash flow concerns of the individuals using these types of cards, $60 is a lot just for the the luxury of not carrying cash. Heck, I don’t have cash flow concerns and I refuse pay an annual fee on any credit card ever.
(I’m making an assumption that a prepaid credit card doesn’t help your credit)
Is the allure of credit cards so strong that people are willing to pay just to have a piece of plastic? Or is there a benefit I’m not seeing?
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Why not just pay extra money to your existing normal, no annual fee, credit card? Then it will be the same as being prepaid.
I think prepaid credit cards are primarily intended as gifts in lieu of cash…
I think people who have a problem handling credit and are afraid to use/abuse it like prepaids. My sister, for example. It makes her feel more comfortable to use something she can’t mess up. It makes no sense to me on so many levels, but I guess that for some there is a safety in the pay-as-you-go aspect.
It seems the best candidate for pre-paid credit cards would be somebody coming out of bankruptcy who can’t get a “real” credit card but still needs the convenience. Same goes for insured credit cards.
Are the pre-paid cards anonymous? If it is I can think of some *reasons* why someone might use it
I have heard of parents giving their teenagers prepaid cards as a safety/emergency measure. Seems like an expensive way to do that but it is worth it to some. I tried to buy a gift certificate and they said there was a fee associated with buying and I definitely turned it down and went elsewhere.
I think it’s as SavingWithMe said, a good way to introduce children to credit cards. It’s also a good gift, as mentioned.
I had a prepaid card years ago that I never paid any fees for – the program didn’t last long. It was marketed as an introduction to credit. It appealed to me because I could put something like $10 on it and use it to sign up for trial offers with questionable organizations; subsequent charges would all be rejected. There’s also the security aspect of it. You can’t lose more than the balance on it.
Mr. Micah and I got some as wedding gifts. I guess it’s considered safer than cash and more portable than checks. We used them for groceries.
Prepaid credit cards are some of the only ways to get money into online Poker site accounts since bank transfers are now illegal.