Free Prepaid Credit Card

By: EconomyWatch   Date: 6 October 2010

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Free Prepaid Credit Cards are easily accessible to those who are unable to apply for a traditional credit card due to approval problems. This is not a conventional credit card, but a credit card type with its own special characteristics. Free prepaid credit cards need to be loaded with funds before transactions are made.

In the case of a traditional credit card, the customer makes a purchase and charges the amount to a credit card. In turn, the cardholder becomes liable for the outstanding debt within a specified time-limit. If he is not able to repay it within the grace period then the card issuing company charges the customer a predetermined rate of interest. A very common phenomenon in such a case is excess expenditure by the customer, leading to consequent default.

However, when it comes to prepaid cards the consumer has to buy the credit card from a company and loads it with an amount of money. The consumer is then able to use the credit card to purchase goods but is strictly limited to the prepaid amount of money loaded on the card. Hence, these types of credit cards are also known as 'Stored-Value Cards'.

Prepaid credit card helps consumers plan their expenditure in advance, and to limit spending strictly within a budgeted amount.

Advantages of free prepaid credit cards

  • Helps restrict excess credit card spending
  • No credit cheque required to apply
  • Employment verification is not mandatory
  • No interest rate
  • Security deposit is not required for opening or holding the card
  • The annual percentage rate (APR) is not charged along with the introductory APR.
  • Most of the companies, except for some, offer free prepaid credit cards and don't charge any annual fee.

For this reason this type of credit card is known as free prepaid credit card. However this claim of 'free card' becomes a sort of a misnomer when the companies start charging registration and other associated fees. Whenever a person reloads more money into his card, the company charges an extra fee to the customer.


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