How Much Do You Know Your Prepaid Cards? Guide for New Users

The best prepaid cards were created when providers realised that a massive portion of the population can’t and won’t have access to other conventional plastic cards like credit and debit cards. However, even some instances, even those individuals who are qualified to get credit cards default on their payments and declare bankruptcy.

The best prepaid cards function just like a combination of checking and credit accounts. Usually, these amazing financial tools are backed up by established bank holding companies and financial institutions. However, money has to be loaded onto the card first before it can be used for ATM withdrawals and purchase transactions.

Fortunately, as soon as money has been loaded onto the prepaid card, it can be used right away. It is reassuring to know that prepaid cards are typically accepted and honoured where credit cards are usually accepted. However, while prepaid cards can be used like credit cards, its financial features are more similar to that of checking accounts.

When prepaid cards are used for purchase transactions, the value of the transaction will be deducted from the balance that’s available on the card. This also means that spending is limited by the balance that is available on the card. If the balance on the card is not enough to cover your purchase, the transaction will be declined.

Get to Know Your Prepaid Cards Better

Prepaid Card Basics

Prepaid cards are deemed an effective and convenient solution for those who have very little knowledge in terms of how banks work. Prepaid cards are also considered the best alternative for those who don’t have access to banking services. The same is true for those who don’t have good credit scores.

Over the years, prepaid cards have become one of the most popular gift options thanks to the protection they provide against loss or theft. In addition, prepaid cards are also considered the preferred option over cash as it can also be used for online purchases. However, unlike gift cards, they have one awesome feature—they can be used to withdraw money at ATMs.

Considering all the enticing benefits prepaid cards provide, it does not come as a surprise that they have evolved into one of the fastest growing niches in the financial sector. The Consumer Financial Protection Bureau projected that there will be a 22 percent annual rise in the number of prepaid cards that will be sold from 2015 to 2020.

Furthermore, the total amount expected to be loaded onto prepaid cards is also expected to double and reach a staggering $116 billion by 2020.

Prepaid Card Benefits

Prepaid cards offer numerous enticing and peerless benefits that are hard to ignore. Using a prepaid card is considered way safer than carrying huge wads of cash wherever you go. Prepaid cards are also acknowledged to have worldwide functionality since they are typically associated with major financial institutions and networks.

Prepaid cards are also considered effective and awesome budgeting tools since they don’t come with credit capabilities. In other words, there is no risk of accumulating mounting debts or spending more than you can afford to. Not only that, when you use prepaid cards, you are also spared from paying costly fees, interests, and other charges.