Prepaid Debit Cards- Great Credit Tools for Young People

Some adults feel skeptical about providing teenagers with a credit card. True, many youngsters have had to deal with bad credit problems as a result of poor credit card use. Nevertheless, you cannot deny the fact that credit cards are necessary for building credit history. If you are worried that your teenager may fall in the trap of bad credit due to uncontrolled spending, you may consider getting a prepaid debit card instead.

Yes, a prepaid debit card gives young people the chance to establish an early credit history while minimizing the risk of bad debt. Debit cards are perfect tools to teach teenagers about responsible financial management. How can prepaid debit cards minimize the risk of bad debt? What is the difference between a regular credit card and a prepaid card? What are the advantages you can enjoy from a prepaid debit card?

The Difference of Credit Cards and Prepaid Cards

Credit cards differ from prepaid debit cards in the sense that the cardholder is not extended a credit line. A prepaid card holder cannot use the card for payment unless there is an available balance deposit in the account. Therefore, bills charged to a prepaid card are not considered debt at all. There is no need for repayment because all prepaid card charges are automatically paid off using the cardholder’s existing funds.

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Prepaid Debit Cards - A Poor Man's Bank?

Prepaid debit cards are making a dent in the check cashing business. For years check cashing shops have served that part of the financial market that did not have conventional bank accounts. Pay checks, government checks and personal checks are all cashed for a fee that can range from 1.5% to 10% of the face value of the check. Typically people paid these rates simply because there are no conventional banks located in their community.

Enter the prepaid debit card. Both Mastercard and Visa have prepaid debit programs that have significant advantages over the traditional check cashing shop. Probably the biggest advantage is not having to carry around cash. If you have just cashed your weekly or bi-weekly paycheck, what do you do with the cash? Carry it on you? Hide it someplace at home?

With the prepaid debit card, your deposit is recorded and the card is the only thing you need to make purchases at a store, online, or get cash out of an ATM. Funding your card can be done by direct deposit or by reloading the card at one of thousands of stores that provide the service. There is no need to carry around more cash than you need. Because the debit card is using your own money and is not a credit card, there typically is no credit check and most persons are approved online immediately. Because there is no credit check there is no inquiry recorded on your credit report.

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Save Your Money Transfer Costs with Prepaid Debit Cards

There was a time when sending money to a loved one who lives at a distant was a complicated process. First, the sender must visit a Money Transfer Service Agent, fill out a form, hand over the money to be sent, pay the service charge, and notify the recipient to give the tracking number. From the recipient’s side, he/she must also visit the Money Transfer Service Branch from his/her location, fill out a form and provide the tracking number to receive the money.

Not only are money transfer costs expensive, the transaction can take time to complete as well. Add to this, there is a serious concern about safety particularly when sending a large amount of cash to long distances. Today however, consumers have a far better option in making money transfers. Did you know that you can save significant costs by using prepaid debit card?

Money Transfers and Prepaid Debit Cards – Perfect Partners

Prepaid debit cards are available for anyone, regardless of his/her credit rating. Even people with bad credit history can get a prepaid card without any hassle. Once the card has been issued, the cardholder can start using it for making payments or sending money anywhere in the world.

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The Benefits of Using a Prepaid Debit Card

Many people do not recognize the benefits of using a prepaid debit card until they need to get one. When suffering from bad credit history, it may be very difficult to get approved for a standard credit card. In this case, applying for a prepaid card can be an option. Can a prepaid debit really be helpful? If yes, how?

Prepaid Debit Cards for Rebuilding Bad Credit

Today, issuers of debit cards provide credit reporting to the major bureaus, making it possible for a person with a poor credit score to repair his/her credit history. Although not all issuers have this provision, you can search the market and find debit cards that can be tools in improving your credit. The good thing is, anyone who can get a prepaid debit card without any complications. Aside from helping your rebuild credit, what other benefits can you expect from a debit card?

Avoid interest rate charges. Everything you charge to your debit card is instantly paid off with your available funds. This means, you will not be charged with any interest rate so you can save your money for more important things.

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The Pros and Cons of Using A Prepaid Debit Card

In response to the increasing number of cardholders who default on their payments, credit card companies have introduced secured credit cards and prepaid debit cards in the market. These cards are alternatives for people with bad credit history and who cannot qualify for regular credit cards.

What Are Prepaid Debit Cards?

Anything you charge to your prepaid debit card will be deducted automatically from the cardholder’s funds. To be able to use a prepaid debit card for payments, the cardholder must have existing balance or credit in his/her account. Once the amount of zero is reached, the cardholder will need to submit a new cash deposit to continue using the debit card. In this article, let us focus on the pros and cons of using a prepaid debit card compared to a traditional credit card.

The Pros of Using A Prepaid Debit Card

Cashless shopping. There is no need to bring along cash when doing your shopping at groceries or malls. Carrying a prepaid debit card is a lot safer than carrying cash since you can simply freeze your account in case the card gets misplaced or stolen.

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Benefits of Prepaid Debit Cards

Great advances have been made over the past several years in the availability of options for people wishing to send money around the world. Whether it's a family member traveling abroad or a migrant worker sending money to family and friends at home, many of us have the need to send money to faraway places at some point in our lives. For years, there were rather limited options for sending money. Individuals could send money the old fashioned way-sending cash or a personal check by mail. Individuals could also use local banks in attempts to wire funds directly. Finally, independent money transfer services could be used.

Each of the above methods worked for transferring funds, but each had a downside as well. Either the money took too long to reach the recipient, the fees associated with the transfer were excessive, or there were security issues that could cause the money to be lost. One of the benefits of technology has been the advances made in making transfers faster, safer, and more affordable. One method of sending money that encompasses all three of these important characteristics is transferring money through a prepaid debit card.

Faster Money Transfers

A prepaid debit card enables money to be transferred almost immediately, taking the funds directly from a credit or debit card. An individual seeking to send money simply needs to establish a relationship with a site offering this service. Currently, a US resident needs to have a valid Social Security number and a Visa, Mastercard, or valid checking account in the United States. A debit card is sent via Fed Ex to the recipient of the funds, who will then receive the PIN number from the person sending the money. This card can be used again and again for money transfers over a long period of time. This will make money available for the recipient much faster than some of the more traditional methods.

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Related Resource:

• Prepaid Services

Why Transfer To A Prepaid Debit Card

IF you already have a credit card, why would you consider applying for a prepaid debit card account? First, let’s discuss how prepaid debit cards differ from regular credit cards and the benefits that a debit card provides.

What are Prepaid Debit Cards?

As the name implies, debit cards are prepaid or paid in advance. Unlike a credit card- which gives you the option to charge purchases in your account and pay for them at a later time, a prepaid debit card doesn’t provide a credit line. Instead, it requires its holder to submit cash in his/her account. This fund will then be used to pay for the debit cardholder’s incoming charges.

Like regular credit cards, debit cards can be used as a method of payment in shops, supermarkets, gasoline stations, diners, boutiques, online stores, and anywhere else credit card payment is accepted. If your debit card carries a VISA or MasterCard logo, you can be sure that it will be accepted by almost all types of merchants and establishments.

PrePaid Debit Cards vs Checking Accounts

In the past, people who do not want to carry around cash issue checks as payment. Today, prepaid debit cards are undoubtedly taking the place of cash advance checks. Why? Well first, it’s easier to pay with a debit card than to issue a check. Second, you won’t have to open a checking account and go through with a complicated application process.

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Which Is Best - Student Credit Card Or Debit Card?

There are two types of cards that students can choose to help them with their schooling- prepaid debit cards and student credit cards. Which of these two cards should you choose? What are their differences and how should they affect your choice? Understanding the basic points about these two credit card options can help you come up with an informed decision. Here’s what you should know.

The Unsecured Student Credit Card

An unsecured student credit card works like any regular credit card. The student is given a credit line which means he can charge expenses on his card as long as he doesn’t exceed this limit. Most student credit cards give a $500 credit limit while others give as much as $1,000 credit line. Since this their first time applying for a credit card, the credit limit given to students are often lower than those allotted to long time credit card holders.

Nevertheless, getting a student credit card is a good way to start building your own credit history while still in school. In fact, being in a college is the only time you can apply for an unsecured credit card without difficulty. Once you’ve graduate, lenders and credit card companies would often require a good credit history to approve your application.

Although not all student credit cards give a low credit limit, this restriction can work to your advantage. By sticking with a low credit line, you also avoid the risk of incurring very large debts on your account. Remember, as a credit card holder, you should do your best not to exceed beyond 50% of your allotted credit.

The Student Prepaid Debit Card

Now let’s talk about the student prepaid debit card. It may look like a credit card and it can actually be used to pay for your purchases just like a credit card but it is different in some ways. How? Instead of a line of credit, you’ll need to deposit money in your account first in order to use the card. If you don’t have existing funds in your debit account, you won’t be able to use the card for payments.

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Related Resources:

• Secured Credit Cards
• Prepaid Services