Prepaid Credit Card is like a credit card or debit card. However, when you are using a prepaid credit card you are using your own money, instead of using others money. Prepaid credit cards are preloaded with fix amount. You cannot use this card unless you load it with a fund. In this post, I will share information about prepaid credit card and its benefits.
What is Prepaid Credit Card?
A prepaid credit card is issued by the financial institution or bank with a preloaded fund. This card looks like a debit card or debit card. However, the main advantage is you can purchase a product or perform a transaction without paying any interest. It works exactly opposite to normal credit card. In normal credit card, you are borrowing your money. However, in the prepaid card, you are using your money. So you need not worry about an increase in debt.
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Benefits of Prepaid Credit Card
- The Prepaid card helps you to adhere to spend limit according to your budget.
- No credit check, employment verification formality require for the issuance of the prepaid card.
- This type of card is easy to procure if you are not looking for any other credit card.
- A person with bad credit history is also eligible for this type of card.
- As no credit facility is offered you cannot get into debt by using this card.
- Many banks allows withdrawal of cash by using this type of card.
- This card can be used to distribute employees’ salaries.
- Prepaid cards can be also used as a gift card or travel card with different currency when you are traveling to abroad.
- This type of card is best for kids. As chance of overspending is nearly nil.
- The prepaid card helps you to improve your credit history and CIBIL credit score.
- This card can also be used to pay your utility bills.
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Types of prepaid cards
There are different types of prepaid cards available in the market.
- Open Looped Cards – Open Looped cards are open system card that can be used at almost every merchant outlets and approved banks. This type of card is marked with brand logo of the affiliate company.
- Closed Loop Cards – Closed loop cards are restricted to affiliated merchant outlet for buying a goods and services. A gift card is ideal example of closed loop card.
- Semi-Open Looped cards – Semi open looped card is hybrid card that are accepted by many merchant outlets or chains, who are affiliated with the card.
- Reloadable cards – This card can be reloaded with the fund anytime, once the amount held in the card has been used.
- Non-Reloadable cards – This type of card cannot be loaded again. Once you utilize the fund you need to throw the card. A gift card falls under this category.
Popular Prepaid Credit Cards
Details of few popular prepaid credit cards are given below.
Axis Smart pay Card – Axis smart pay card is a business gift card. This card comes with the validity of 5 years. This card can be used at ATM as well as purchase transactions. The daily transaction limit of this card is Rs.20000.
SBI Smart Payout Card – SBI Smart Payout card is a reloadable card with maximum loading limit of Rs.10000. The validity of card is 10 years. The card can be used for good purchase as well as for ATM transactions.
HDFC Prepaid Credit Cards – HDFC offered multiple prepaid credit card like forexplus card, Gift plus card, Foodplus card, Moneyplus card and Hajj Umrah Card.
ICICI Prepaid Credit Cards – ICICI bank also offers multiple prepaid cards to customer like Multiwallet card, PayDiret Card, Memento Gift Card, Meal card and Reimbursement card.
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Shortcoming of prepaid credit cards
Although prepaid card has multiple advantage this type of card has following shortcomings.
- There could be hidden charges associated with these types of cards.
- You cannot use this card unless you reload it.
- Consumer protection terms for these types of a card is not very clear.
- The card can be misused in case of lost or theft.
In a nutshell, it can be said the prepaid credit card is very good alternative of cash and credit card. You can use this card in order to control your expense. However, if you have self-control over expense it is advisable to use debit card instead of using prepaid credit cards.