3 Advantages of Prepaid Credit Cards

Using prepaid credit cards instead of traditional credit cards can offer many benefits. Most people just use the traditional form of credit cards where you are issued a limit and then pay off the balance later. Prepaid credit cards work a little differently in that you decide how much you are going to spend ahead of time. You can only spend however much money you have on the cards. Here are a few of the more important advantages of prepaid credit cards.

1. Stop Overextending your Budget

Most people in today's world are living paycheck to paycheck. They live on a limited income which means that they cannot have everything that they want to have on a monthly basis. One way that a lot of people get around this problem is that they pay for things with credit cards. When they want something that they could not normally afford, they just put it on the card and worry about it later. While this can present you with some immediate gratification, it will usually compound your problems later on. When you buy things that you know you cannot afford, it can lead to extreme levels of debt that you cannot get out of. That might lead to bankruptcy or actions that can damage your credit score. 

2. Budget Expenses

When you use a prepaid credit card, it forces you to take a look at your expenses. When you know that you are going to be spending money, it forces you to decide how much you need on the prepaid credit card. You will usually use much more scrutiny because you actually have to come up with the money ahead of time. When you use a regular credit card for expenses, you do not have to be nearly as detailed. You just charge it and worry about it later. Using a prepaid card allows you to budget more easily.

3. Control Others Expenses

Sometimes you run across the need to allow others to spend your money. For example, you might have employees or children that need access to money. Instead of giving them a regular credit card for their expenses, let them have a prepaid credit card instead. This way you will know exactly how much they can spend. If you give them free reign of a traditional credit card, they could get you in trouble. Regardless of whether you made the purchase or not, you will still be liable to pay back the balance. If a disgruntled employee or upset child has your credit card, they could hurt you. They might decide to go on a shopping spree and rack up a huge credit card balance.

When you use prepaid credit cards, you will not have to worry about this problem. They can only spend however much money you decided to put on the card in advance. This is also better than giving those cash because you can see exactly what they spent your money on. 


Improve Your Credit Score - Free Consultation