Whilst having access to credit can help a consumer out of a short-term financial hole, it is just as likely to put that person in one. According to myfico.com, the typical consumer has an average of 13 credit obligations - four loan installment plans and nine charge card agreements. A prepaid credit card helps people to avoid debt because the individual is only able to spend their own money. Whilst there are charges for loading and setting up the card, there are no unwelcome surprises.
How Prepaid Credit Cards Work
- Apply for a no credit check credit card - acceptance is guaranteed for all applicants.
- A set-up fee will typically be applied to the account balance.
- The customer loads their own money onto the card, but it is not instantly available.
- Once the balance clears, a consumer is free to spend this money on goods and services.
Prepaid Bank Cards Help Consumers Avoid Credit Card Debt
A traditional charge card involves credit scoring and the offer of a credit limit. Although this can help a consumer when personal finances are a little tight, interest and charges can accrue quickly. This can lead to high debt repayments, stress, anxiety, collection agency activity and/or a low credit score. Whilst some consumers are able to avoid debt because they are able to avoid temptation, a number of people genuinely struggle to manage credit. A prepaid credit card helps someone to effectively manage their finances.
No Credit Check Credit Card for People with Bad Credit
Should a consumer have an adverse repayment history, eligibility for mainstream charges cards will be limited to bad credit products (if available). Poor credit normally results in an application for credit being rejected due to the risk of default. Even those who are granted approval for bad credit products will face a higher rate of interest. A prepaid credit card does not involve credit scoring so acceptance is guaranteed for all applicants. This doesn't just help someone to avoid credit card debt, it can be the difference between acceptance and rejection.
Further Prepaid Credit Card Considerations
A prepaid bank card does not involve any credit scoring which means that it is an ideal no credit check credit card for people with bad credit. It is possible to avoid debt and effectively manage personal finances now and in the future. However, charges will be incurred for setting up a prepaid credit card, making cash withdrawals from ATM's and loading money onto the card. Alternatives, for those who have an adverse credit rating and sufficient collateral, include the secured credit card.
Sources
Woolsey, Ben. " Credit card statistics, industry facts, debt statistics." CreditCards.com
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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