Prepaid credit cards limit credit risk
With identity theft and credit-card fraud making headlines these days, travelers are on high alert when it comes to financial transactions.
Both MasterCard and Visa now offer credit-free variations on their traditional cards.
Sold in either pre-set denominations or as personalized, reloadable accounts, these cards function much the same way as regular credit/ATM cards.
They can be used to make purchases wherever Visa and MasterCard are normally accepted — stores, restaurants, hotels, for example — and they work in ATMs to withdraw cash or foreign currency.
They also can be used to make deposits for rental cars and hotels.
One reason these cards are safer than other forms of plastic is because they contain only as much value as was deposited beforehand.
Prepaid cardholders have zero liability for loss or fraudulent use and can get reimbursed for funds they lose. Some cards also offer emergency-assistance services and baggage-loss protections.
Finally, because prepaid cards are not linked to a customer’s other accounts, there’s no chance for a thief to use ill-gotten data to access other financial records.
Prepaid accounts are much simpler to open, requiring little of the application anxieties, formalities or credit-worthiness of charge or debit accounts, even for people with bad credit records.
Accounts can be opened for as little as $250 worth of value, and some can go as high as $9,000.
And for undisciplined spenders, these cards provide a kind of check and balance — you can spend only as much as is on the card, until you add more.
Cardholders may pay a one-time activation fee for the account that ranges from $5 to $15, and a few dollars more every time money is added to the account.
There are also limits on how much money can be added or withdrawn at a time.
Furthermore, there may be charges to call and check how much balance remains on the card, although most offer that information free online.
Unused prepaid cards generally retain their value for several years, although there can be a charge if funds left in the account are cashed out.
Prepaid cards limit credit risk, Pittsburgh Post-Gazette, via FortWayne.com, July 17, 2006
