The benefits of pre-paid credit cards

Pre-paid credit cards are some of the best budgeting tools that you can use today to keep your financial life on track. Taking advantages of these cards can be a smart move if you prefer using plastic to cash.

They can keep you from overspending just like a cash budget does, but it can allow you to make purchases online or to simply go grocery shopping without carrying around a wad of cash. Besides this, these cards offer some extra protection that debit cards simply can't match.

How pre-paid credit cards work

Basically, pre-paid credit cards work in the real world just like debit or credit cards. You can use them just about anywhere that accepts plastic, including online stores. However, rather than having a credit limit, as you do with a credit card, you have to actually load a pre-paid card with money that you already have. For this reason, you can't go into debt with a pre-paid card. If you get to the end of the money that's on your card, it will simply be rejected.

One thing to look out for with pre-paid cards, though, is that they can cost more money than credit cards if you don't use them correctly. For instance, you'll have to actually buy the card at the start, and you'll probably have to pay each time you load the card; the fee is usually around a pound, unless, as with some cards, you do the transaction in a certain bank or on a certain website.

Also, many pre-paid credit cards have monthly usage fees, and some of them charge a certain percentage in usage charges each time you use them. All these fees can add up pretty quickly, so be sure that you read the fine print when you're choosing a card so that you know what to expect.

Reap the rewards

That said, these cards are actually a huge advantage for some people. If you have a poor credit rating, you can get a pre-paid card with no hassle, and you may even be able to use the card to help rebuild your credit score.

Many people who are just beginning to budget will find that a pre-paid card is useful since it absolutely doesn't allow you to spend more money than you have - stopping you using money you don't have and getting into debt.

Online transaction protection is one of the main advantages to these cards. Since the card isn't linked to a credit limit or a bank account, the only thing you're risking is the balance of the card. Also, you can easily link the card to your wages so that every paycheque goes directly to the card, and you can also use the card to quickly and easily pay bills online or over the phone so that you don't have to worry about mailing in cheques, which takes longer.

As you can see, if you use them correctly, pre-paid credit cards have some major advantages for many people. Just be sure that you research different types of pre-paid cards before settling on the one you want to use.