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Why a Prepaid Debit Card and Not a Credit Card?
Prepaid debit cards are a good alternative to credit cards for anyone who is trying to control their spending. A prepaid debit card allows a consumer to deposit their money into a virtual account that can be accessed through a debit card. Once the funds are depleted, the consumer cannot spend anymore.
Unlike a credit card, a prepaid debit card does not allow a consumer to spend money he or she doesnt have. This prevents the consumer from racking up debt that he or she cannot pay off. Additionally, there is no interest charged on a prepaid card, and no bills to pay at the end of the month.
All these make the prepaid debit card a more responsible tool for budgeting and spending money, at least compared to a credit card.
In addition to controlling spending, many people like to use prepaid debit cards to send money abroad or give a gift to a relative or friend. Since these cards are easy to load and mail, they are ideal for people who need to send money abroad. In fact, they are safer than sending cash or checks through the mail, since many cards are able to be re-issued if the proper paperwork is kept. These debit cards can be used in many countries. A Visa debit card is particularly convenient since it can be used at thousands of stores and restaurants that also accept a Visa credit card.
Unlike credit cards, debit cards do not charge interest, but there are a few fees involved with using them. Just like a checking account at the bank, most prepaid cards will charge a maintenance fee once a month, as well as a small transaction fee when the card is used. Prepaid cards such as a Visa debit card do this in order to recoup their costs for issuing the cards and transferring the money from the card to the merchant or to other accounts. However, these payment and transfer fees are very low compared to those charged by banks for similar transactions.
All in all, prepaid debit cards are a great way to control spending through the holiday season, an excellent alternative to a high fee checking account, and an inexpensive way to transfer money to relatives and friends abroad.
The Basic Credit Card Types (Page 1 of 3)
It may seem incredible, but credit card issuers clog the mails with over 2.5 billion offers inviting people to apply for a credit card. Even those who would not qualify for a conventional credit card due to serious credit problems are now able to get one; some credit card issuers even specialize in this particular type of market. And according to financial gurus, there are at least a billion credit cards in active circulation throughout the United States alone.
Credit has been an economic cornerstone for some time now. Surveys show that the average American household is estimated to have at least twelve credit cards, including charge cards. While you may tend to think that one credit card is pretty much the same as the next, there are in actual fact distinct characteristics for each different credit card type. It is good to know these difference between the three different types of cards in the market: a bank credit card, a travel credit card, an entertainment credit card (although nowadays the combined travel and entertainment card has become more common) and a retail credit card or house card.
Bank Credit Cards You have probably noticed that most credit cards bear either the logo of Visa or MasterCard together with the name of the bank. It would appear that the credit card has been issued by either Visa or MasterCard. That is not quite an accurate assumption: these two companies do not issue credit cards directly to the consumers. Most of the credit cards on the market today are offered by thousands of banks around the globe. Each bank is linked to the credit card association, because are not allowed to issue any kind of card unless they are association members.
Visa is a privately held membership association, although it is preparing to go public. It started as an association of banks in California and the West Coast. There are over 20,000 financial institutions in the membership rolls, and virtually all of them offer Visa Card. MasterCard is also a membership association, similar to Visa, and originally consisted of member banks in the East.
A bank credit card is in reality a revolving credit line. When you receive your statement, you can pay all or part of your balance each month, run up the balance again and so on. Being a credit line, the account comes with a pre-determined credit limit that depends on key factors like disposable income, credit history, etc. The credit limit can be as low as a $100 or as high as many thousands of dollars.
It is possible for card holders to get themselves into trouble when they do not properly manage the revolving credit line. When you carry a balance instead of paying it off, the credit card issuer starts charging interest on that balance in some cases, this interest could be pretty steep. The interest rate varies widely, depending on who issued the card, but you could expect the average credit card interest rate to be at about 18 percent.
For instance, if you carry forward a $1,000 balance for 12 months, you pay $180 in interest per year or $15 every month. If you maintain a $1,000 savings account, you will earn about $40 in interest per year. Those who get into trouble will have to reduce debt, and one of the more common ways to go about this, is to arrange for credit card debt consolidation, which helps lighten the interest burden.