Prepaid Card vs. Credit Card: What is the Difference?
If you don’t have control over your finances, you will never reach your financial goals (early retirement, buying a home, etc.).
But here’s the deal:
Managing your spendings is tough. Having a significant amount of money makes people crazy, and they quickly fall into the credit card trap.
Well, it turns out you can live with no debt.
In today’s post, we`re going to discuss the benefits you can get from bank cards and not get into debt, so you can decide which one is for you.
First of all, a prepaid card is not a credit card at all. It won’t allow you to spend more money than you have. Since your spendings cannot exceed the accessible balance, you don’t have to worry about overdraft charges.
Or is it?
To start using a card you have to “load” it with money first. Once the loaded funds are over, you need to re-load it by any of the following ways:
- Setting up direct deposit.
- Using mobile check deposit.
- Transferring money from your bank account.
- Loading cash at ATMs, bank branches, retail locations, etc.
Or you can purchase a prepaid card for one-time use with some value ($100 for example).
It gets better:
It doesn’t require any credit check. So, you can get it even if your credit history is not so good and you can’t open a checking account. This is also a great option for those who don’t want to deal with a bank at all.
Who need it?
Taking into account its benefits, a prepaid card is the best choice for:
- Teens and students who get an allowance from parents
- Parents (to teach children how to budget money and track expenses)
- Travelers (to keep money secure)
- Young people who have not build their credit
- People who are not self-disciplined to handle with overspending
Are you on this list?
If yes, apply for a prepaid card. If not, keep reading.
Unlike credit cards, prepaid ones won’t let you to:
- Build credit score for future bank transactions, because it is not reported to the authorized bureaus.
- Get any perks and rewards (which you can use for a free flight or hotel, for example).
- Book flights, hotels, and other accommodations.
- Get your money back if the card is lost.
If you need some of these things, you should better choose a credit card. But you have to understand the consequences, which may result in running you into debt.
Whenever you apply for a prepaid card or a credit card, think about why you need it: “Is it better to keep control of my finances, or am I just going to spend more money?”