With the rise in the number of pre-paid credit cards available, and the fact that they seem to be here to stay, there is a lot of debate at the moment about credit cards and pre-paid cards and the advantages and disadvantages of each.
With a credit card you have the ability to borrow money that you don’t have to buy things you want or need, and then pay it back a little at a time.
With a pre-paid card, you can make purchases in the same way as you would with a credit card, but you top up the card in advance with your own money before you do so meaning that you never go into debt.
Each of these two things can be very useful, so deciding which type of card is suitable for you will depend very much on your own personal circumstances. One thing that both types of card have in common is that they can be used in thousands of stores on and offline world wide.
If you have had problems in the past with debt, or for whatever reason can’t or don’t want to be extended any credit then you may find that your best choice would be a pre-paid card.
The advantages of a pre-paid card are:
• No chance of building any debt
• No interest fees
• No late fees
• No credit checks & won’t affect your credit rating
• Some cards can be used from age 14 upwards
• Some cards are specifically designed for using abroad and offer good exchange rates
• No risk to your bank details when you make purchases online
This type of card can be very useful if you’re not great at budgeting, have had debt problems, or are worried about the risk of them, or just want a simple way to make the occasional purchase without the need for a credit check.
If you want to make larger purchases with money that you don’t actually have, or take advantage of reward schemes linked to credit cards, then a traditional credit card may be your best option.
The advantages of a traditional credit card are:
• The ability to borrow money to buy things and pay it back later
• Larger purchasing power
• Can help increase your credit rating
• Flexibility
• Interest free credit (usually up to 60 days)
• Insurance cover when buying items
This type of card can be excellent if you don’t have debt problems, are good at budgeting and have a good credit history.
