A pre-paid credit card is just what it says, a credit card paid for in advance. Once the credit limit is reached, the credit card is just a piece of plastic. You have to again pay upfront to renew it. The credit limit is thus known, fixed and limited.

Advantages Of Pre-Paid Credit Cards

Pre-paid credit cards are sure guarantee against empty bank accounts and credit-induced poverty. Your pride remains intact as pre-paid credit cards look just like the usual credit cards. No one will know that your spending is restricted. They are boon to shopaholics and impulsive buyers who end up with a mountain of debt before you can say Jack Robinson. They are an excellent buy for parents whose teenagers want to be treated as adults. Teenagers can also independently use their pocket money, summer job earnings and cash gifts to buy one. Some, like the Visa Gift Card, make an ideal birthday or wedding present. After all, buying presents can be nerve-wracking if you do not know what the prospective recipient wants or will appreciate, and sometimes because you do know! Others like Visa's Travel Money Card are like travelers cheques without the attendants hassles. Most such cards may also come with benefits like protection from card theft, identity theft or fraudulent purchase.

Some companies find it a good substitute for paychecks. Employees get pre-paid credit cards limited to their salaries and linked to a single bank account of the company. The employee does not need a separate salary account. Additionally, he can step out of the office and into a shop, restaurant or a mall. No frustration of standing in queues to encash that salary check.

Some Problematic Areas

One of the disadvantages of pre-paid credit cards is that they charge a fee. It is also possible that the places where you shop, eat or buy may not accept pre-paid credit cards.

However, overall the benefits outnumber the drawbacks. All those in need of fiscal discipline for themselves should go for pre-paid credit cards.