Pre-paid Credit Cards for Teenages
Prepaid credit cards are a great new method that is available to parents who want to show their kids how to manage money. They allow parents great control over their child's spending, as the parent can monitor easily what the child is buying. These cards can also be really useful to young adults who want to learn how to manage their own money too.
Prepaid credit cards have various benefits associated with them, the primary of which is that you can control the spending limits and there is no chance of going into debt. Because you have to hand over your cash first to load onto the prepaid card, you absolutely can't spend more money than you can afford to. This means you get the advantages and ease of using a credit card, without the risks of overspending meaning that for people who are either worried about getting into debt, or struggling to get out of it, they are an ideal solution.
Understanding how a prepaid credit card works is quite easy. You load the card with an amount of money that suits how much you can afford to spend, and then from here on, it can be used just like a credit card to make purchases. However, instead of racking up a debt on a credit card that you then have to pay back, the money is deducted from the balance of the amount you've already paid onto the card. Once the amount of money on the card reaches £0.00 you can no longer use it until you load more money onto it. So if you're living on a budget, or have bad credit, you can still partake in the benefits of using a credit card to purchase things on the internet, rent hotels, or make other purchases that need a credit card, but without the worries of how you're going to pay the money later.
Of course everything isn't roses with any sort of credit card including prepaid ones. The primary drawbacks are that you will have fees to pay to establish and maintain the card. The first fee is normally an activation fee which you pay initially to set the card up. From this point on, some cards will deduct a monthly fee from the card to keep it going, while other cards don't charge a fee as long as you have a minimum balance on there. Some others again, charge a percentage of what you spend – so if you load the card with £100 and then spend £50 of that, if the card charges 4% you'd then pay a £2 fee on top of the £50 that you spent leaving you with a balance of £48 left to spend. You need to make sure you are aware of exactly how your chosen card works up front. Learn what the fees are, and whether you will be charged when you spend too.
Prepaid cards can be excellent ways of helping people to establish good money management and budgeting skills, but you'll still need to pay attention to what you are spending and how much is left available on the card.
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