Prepaid credit cards are one of the most talked-about financial products today. They have become an integral part of our everyday life, and for a good reason: they empower you to make purchases without having to use a credit card or debit card. They’re convenient, safe, and can be used almost anywhere. The cherry on top? You can’t go over your credit limit, so your credit scores stay unaffected.
These credit cards allow you to fill them up with your own money and make purchases till it exhausts. You do not borrow money from a creditor but instead use your own funds, similar to a debit card.
Prepaid cards can be used as payment gateway cards or store gift cards. It can be seen as a good alternative to a bank account for many people. In fact, it can be a great tool for debt consolidation.
How prepaid credit cards work?
You don’t need to withdraw cash or write cheques to use the balance on your credit card. You can do direct online and offline transactions with the card details.
Prepaid cards are usually a one-size-fits-all solution for anyone who struggles with their finances, wants to pay as they go, and avoids debts. If you’re interested in obtaining one, this guide will give you all the reasons it helps in debt management.
What is debt management?
Debt management is a process for keeping track of the debt you owe to other people or entities. Debt management aims to keep track of how much you owe and what is owed to you and make sure that it all gets promptly paid. It can also be used to help you pay off the debt by creating smaller payments over a longer period.
Prepaid credit cards, when used wisely, can be an excellent way to end your debts through debt consolidation.
Prepaid credit cards and debt management
Do you sometimes feel like you’re up to your eyeballs in bills? Or maybe some of your financial missteps have come back to haunt you, and now your credit score is lower than you’d like.
Harsh credit checks can keep you from getting access to the financial help you need—and who wants to be denied access to a loan or be forced to accept a super-high interest rate that makes it hard to pay off your debts?
Prepaid cards let you avoid those harsh penalties while still offering all the perks most people want from their credit cards. You don’t have to worry about overspending because the money has already been loaded onto the card by you.
Can a prepaid credit card help with debt management?
The clear answer is yes. There are several ways that a prepaid credit card can help you manage your debt, with the main being that you won’t have to worry about payment dates and credit statements for an outstanding bill amount like in a credit card.
Because of these and several other benefits, prepaid credit cards are the way to go when it comes to managing your debt and keeping your finances in good standing. Here’s some of the advantages of switching over to prepaid credit cards:
1. Avoid late payments or missing due dates
The first way that a prepaid credit card helps with debt management is by avoiding late payments. When you’re on an installment plan to pay off your debt and miss one payment, your interest rate goes up, which means all of your future payments will be higher than they should have been.
A prepaid credit card doesn’t do this; you only spend what’s available on the card at any given time, so there’s no room for late or missed payments.
2. Reduces the chances of overspending
Another way that a prepaid credit card helps with debt management is by avoiding the temptation to overspend. With a traditional credit card, even if you don’t have the money in your bank account to pay it off, you can still make purchases and carry the balance over from month to month.
But when you can only spend what’s available on your prepaid credit card, there’s no risk of spending more than you have in your account at any given time.
3. No interest means saving money
You’re not borrowing from a bank or creating a revolving balance, which means you won’t be accumulating interest on purchases. Thus, a prepaid credit card is a fantastic tool that helps you get over the problem of interest payments. You’re only obliged to pay a minimal amount of fees, but it never hurts as much as monthly interest payments.
4. Minimizes credit examinations
If you’re worried about penalties or credit checks from banks, prepaid credit cards can help. With these cards, you can be assured that you will never be charged an overage fee. This also ensures that your credit score remains pristine.
Your money is safe in your pocket until you need it, and additionally, prepaid credit cards support debt management because you won’t be taking on harsh credit checks when applying for loans.
5. Helps to avoid penalties
Spending minimizes any risk of overdraft fees and bank penalties. Prepaid credit cards are a wonderful option for the finance-savvy consumer.
They carry none of the penalties that a regular credit card does. They are also much easier to obtain than a normal credit card, as they do not require a check of your credit history. Thus your credit score remains safe as there won’t be any hard checks.
Endnote
Prepaid cards are designed to help you build financial discipline as they give you additional control over your spending.
You can only spend what you’ve loaded into the account, which means it’s much easier to avoid going over budget or over-spending and getting into debt. Prepaid credit cards are beneficial for everyone who wishes to avoid hefty bank charges and the hassle of spending limits.
Want to know the best ways to manage your finances and stay out of debt? Connect with a professional financial expert!
