Prepaid Payment Cards

Prepaid Payment Cards Explained

Many prepaid payment cards look just like regular debit cards. These cards feature a credit card logo, the name of the cardholder, and an account number. Not all prepaid cards have these features, but many card issuers strive to distribute cards which are seemingly identical in appearance to regular credit cards.

The major difference with prepaid cards is that they are not tied to a revolving credit account. Instead, money deposited by the cardholder becomes the available balance, minus any fees. Cardholders cannot exceed the balance, and some cards come with per-usage fees in addition to other costs.

Budget Tools

Prepaid payment cards aren't only for people who can't get credit cards due to bad credit. Many cardholders use these cards as budgetary tools for things they regularly spend money on. For example, if you know that you will spend $120 a month to gas up your car, buying a prepaid gas card and loading $120 onto the card monthly can be one way to keep your finances organized. This works especially well for people who are paid infrequently – such as one paycheck a month – because when they receive their paychecks they can simply load up the various prepaid cards they hold and know that they are covered for their recurring expenses until the next paycheck.

Lowering Expenses

Some cardholders use prepaid cards in an attempt to lower the amount of money they spend on a certain item. For example, people who are attempting to cut back on the number of designer coffees they consume on a daily basis might purchase a prepaid coffee card at their favorite coffee retailer and limit their purchases to the amount loaded onto the card. Both major coffee chains and smaller local chains offer prepaid cards, so this is a great example of how a prepaid card can be used to ultimately save some money in the long run.

Prepaid Cards as Gifts

Prepaid cards can be given as gifts:

• Specific stores offer gift cards which are prepaid by the buyer with an option to reload the balance by the recipient sometimes offered.
• Major credit card issuers offer prepaid gift cards which are initially funded by the gift giver and which sometimes come with the capability to be reloaded and reused by the cardholder.

Some gift cards come with hefty fees and other costs, so it may be better to seek out a prepaid card that is specifically designed for people who want the option to continually reload the card and use it again and again.

Find Prepaid Cards

There are plenty of options to choose from when searching for prepaid cards. Many local merchants offer prepaid cards, as do major retailers. Be sure to take a close look at the fees associated with prepaid cards before you decide to buy one, otherwise you might wind up spending a lot more money to use the card than you thought you would. Not all prepaid card issuers charge fees, but you will want to make sure of the terms and conditions of the particular card you choose.

• Prepaid gas cards are offered by many gas stations, and many can be used to pay at the pump.
• Phone cards for both cellular phones and home phones can be purchased for a variety of telephone service providers.
• Some prepaid coffee cards can be reloaded using automatic bank account payments.
• Prepaid debit cards are appropriate as gifts, for traveling, and as reloadable budgetary tools.

For almost every recurring purchase, there is an appropriate prepaid card. As long as the card you choose is not riddled with fees, it can be an effective way to budget your spending on certain items.