Prepaid debit cards first became popular in the early 1990's, as many credit card companies realized that a large portion of the American population was unable to qualify for their regular credit cards. In the end, however, the benefits of prepaid credit cards outweigh the negatives for most people, including those who do not already have credit.
One of the benefits of prepaid cards is that they are convenient for both credit and debit card users. While a credit card holder may be required to pay a monthly fee on the balance, a debit card user is given a plastic card which is valid for no more than a month. This means a debit card holder can use their card in any store or place with a plastic card reader without worrying about spending too much money, and that they will not be subjected to over the limit charges when they reach the limit on the card.
Another advantage to these types of cards is that users are not required to carry around cash when using their cards or in many cases, even carrying around credit cards when they are out in public. When the plastic cardholder uses their card, they are able to deposit funds into their account before the account is drained. The funds from the deposited funds are automatically credited into the card user's account.
There are some disadvantages to using a prepaid debit card, however. If a person uses the card to make purchases, they will need to provide their debit card information to the retailer. Many stores will then require an additional security measure to verify the identity of the cardholder in order to process the transaction.
Some banks and credit unions have begun to require credit checks, and even credit checks done by private investigators, in order to process a credit card transaction. This means that if the customer has ever had a bankruptcy or other credit problem, they could find themselves out of a bank account because they failed to disclose it to the bank at the time of purchase. In some cases, a credit check may be required because the bank may discover that a person does not have enough available credit to make the purchase.
Some people also argue that a prepaid credit card is better than a credit card because credit holders have an obligation to pay the entire balance. to the credit card issuer. Prepaid cards are considered “free” money because they are not considered a debt, which means that they never have to be paid back. and can therefore be withdrawn for whatever the user needs to spend them on.