Q:

What are the benefits of using a prepaid credit card?

A:

Quick Answer

There are several benefits to using a prepaid card, including to help limit spending, avoid carrying large amounts of cash or more vulnerable credit cards, and to teach young users about money, according to Constance Gustke for Bankrate. Additionally, personal information cannot be stolen from prepaid cards because these cards are not connected to it, keeping data such as Social Security and bank account numbers safe.

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Full Answer

Because prepaid cards need previously deposited funds to use for purchases, they offer no credit balance, so the user only spends money he has and does not go into debt, explains Gustke. Such controlled spending allows the user to better manage previous debt and save for the long term. Prepaid debit cards are an excellent choice to use when traveling; the user loses only the current amount loaded on the card if the card is lost or stolen. There is no risk of damage to credit history or bank accounts, where funds may be more unlimited.

Parents benefit from prepaid cards by giving them to children with set limited amounts, reports Gustke. This forces the children to learn about spending habits, and parents have the option with certain prepaid cards to reload them when necessary and lock the account if desired. When making purchases online, buyers often find it less risky to use prepaid cards that reveal minimal personal information and help prevent identity theft and fraud.

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