Advantages of Prepaid Cards

Prepaid cards can offer the convenience of credit cards without the danger of getting into debt. Unlike credit cards prepaid cards can not build up a large amount of debt.  Credit cards often charge the highest interest rates compared to almost any other type of lending.   If there are insufficient funds in a prepaid account then a transaction is not completed.  

In a similar way, prepaid cards can be a low risk way to give a degree of financial independence to a relative, for example a college student.  By paying the spending money up front then the guarantor of the card, usually the parent can have the peace of mind that they will not be liable for any debts quickly building up by someone who has not yet learnt how to budget properly.

Prepaid cards are more widely available than credit cards.  Credit card providers can turn people down because they are too young, newly arrived in the United States or have a poor credit record. Prepaid cards rarely have these restrictions as there is far less risk to the card provider.

The advantages of Prepaid cards over cash is that they can be used on the Internet or with telephone ordering, where cash can not.  Many of the best deals that are available are from these types of suppliers, as they tend to have a lower cost base.  Cash can be inconvenient to carry on your person as larger amounts of cash can attract thieves.  If a person is robbed a card is easy to cancel and replace.

Checks are probably the most similar to prepaid cards.  However a prepaid card does offer some advantages over checks.  If the balance on a prepaid card does not have sufficient funds then it will be refused by the vendor.  There is no consequence apart from not being able to immediately purchase the item.  If there are insufficient funds in the checking account then this becomes problematic as the account will become overdrawn without warning. As with cash, online and telephone only businesses tend not to take checks. Although some of the biggest businesses may invoice the customer and accept checks, most online businesses now insist on card purchases.