Charlie and the Credit Factory

Prepaid Visa Card

Benefits of a Prepaid Visa Card

Some people think a prepaid Visa card (also referred to as a secured Visa) is only for people who have bad credit. But others are realizing that a prepaid Visa card can be a good learning tool when it comes to credit. A prepaid Visa card is accepted anywhere that Visa is accepted, and nobody really knows it's a prepaid card. But if you suspect you would have trouble with overspending if you had a regular Visa, a prepaid Visa card might be the way to go. Why? Because regular Visa cards generally come with high limits--generally more than you could afford to pay off in full if you maxed it out. That temptation is just too great for some people. But if you know that in advance, you could get a prepaid Visa card to avoid getting into debt because you set the limit. You decide how much you can afford, then you send that amount in with your application. There is a small fee to set it up, but the remaining amount is your balance. It's a lot like a debit card (except for the setup fee).

A prepaid Visa card is also a good tool for college students. Some parents don't like to send their kids off to college without some way to have money. Giving them a prepaid Visa card with a reasonable limit--say, $500-$1,000 for the semester or the entire school year--will teach them to keep track of their spending. In fact, that's one way that prepaid Visa cards are different from other Visa cards. If you only have, say...$25 left on your prepaid Visa card, but the total of your purchase is $30, the transaction will be declined. This can be quite embarrassing for a student if he offers to foot the bill for the beer and pizza, and that can teach him to keep track better. A regular Visa would allow the transaction and charge you an over-the-limit fee. But late fees and over-the-limit fees are things of the past with a prepaid card. (Yet another reason people find them so appealing.)

A prepaid Visa is not the same as a prepaid Visa gift card. Generally the amount of a prepaid Visa gift card is much lower because it's a gift. But the concept is the same as with a prepaid credit card--purchases are deducted from the amount that's already been paid. And that's the long and short of it.