Reloadable Prepaid Cards

Reloadable Prepaid Cards Explained

Prepaid cards look just like regular credit and debit cards. The cards feature the logo of a major credit card issuer in addition to the cardholder's name and an expiration date. The cardholder initially funds the card with an amount of money that then becomes the available funds on the card, minus any fees. Prepaid cards can be used for purchases just like any other credit or debit card, although in some cases – such as with paying for gas at the pump – prepaid cards may not work.

Reloadable prepaid cards have balances that can be replenished by the cardholder so the card can be used over and over again. As long as the cardholder continues to deposit money into the card's account, the card will remain active. Most prepaid card issuers allow cardholders to quickly and easily load more money onto the cards using automatic transfers.

Popular Uses

Although people with credit cards may wonder why anyone would ever have occasion to use a prepaid card, these cards come in quite handy for some people who would rather not use a regular credit card in certain instances.

Parents

When teenagers start clamoring for credit cards of their own, many parents turn to prepaid cards to help teach kids about budgeting and credit card usage. Some parents purchase reloadable cards for their kids and then load a weekly allowance directly on to the card. The advantages to this system are numerous:

• Teenagers learn about the use of credit cards to prepare them for when they eventually leave the home and have their own revolving credit accounts.
• Young shoppers cannot exceed their spending limit, and therefore do not put the parents at risk for financial problems.
• Teens learn about the importance of safeguarding a card and not allowing other people access to the card number.

Not all parents like the idea of their teenagers being set loose in a mall with credit cards in hand, so prepaid cards can be a good solution.

Travelers

Carrying a credit card while traveling domestically and overseas can be a lot safer than carrying large amounts of cash. Reloadable cards offer the additional advantage of allowing cardholders the capability of electronically reloading the balance on the card with usually no more than a simple phone call to the bank. Travelers sometimes use prepaid cards as ways to budget their spending while on vacation, while some business travelers will have the balance loaded by their employers for expenses incurred while traveling.

Bad Credit

For people who have bad credit and cannot get approved for a traditional credit card, a prepaid card can be a suitable solution. Cardholders with bad credit can usually obtain reloadable cards without a credit check. The balance on the card is reloaded, so as long as the cardholder is willing to pay the accompanying fees, the card can be used just like a traditional credit card.

Beware of Fees

Reloadable cards are not without fees. Some of the typical fees associated with these types of prepaid cards include:

• Initial purchase fee
• Usage fees
• Card replacement fee
• Balance replenishment fees
• Balance inquiry fees

Just like traditional credit cards, there are some reloadable cards which are better than others. Before purchasing a card make sure that you read the fee information carefully so that you aren't buying a card which will repeatedly deplete your balance with excessive fees.

Find Cards Online

Several reputable credit card issuers offer reloadable cards:

• American Express offers reloadable cards which are specially designed for travelers.
• Visa prepaid reloadable cards can be purchased over the Internet as well as over the phone and at local retailers.
• Mastercard's Mio Money is marketed toward people who do not have access to bank accounts or credit cards.

Some financial institutions, such as banks and credit unions, offer prepaid reloadable cards to their customers at discounted costs.