The convenience of shopping/ transacting with plastic money is undeniable.  However, there are pitfalls involved in using a credit or a debit card. With a credit card, there is a danger of overspending and getting into the spiral of revolving credit and paying high-interest charges on unpaid amounts. At the same time, you never know when you will empty out your bank account if you have no control over your spending while using a debit card.   

So there comes in a wonderful alternative to these woes - A prepaid credit card

What Is A Prepaid Credit Card? 

As said in the name, prepaid credit cards are preloaded with money and are issued by various banks. The process of the issue is much simpler as there is always the security of prepaid money. Hence, the issue of prepaid cards is not dependant on the salary eligibility, credit score etc. These cards look like any other credit or debit card with EMV chip, MasterCard or Visa logo, the name of the issuer bank etc.  The issuer charges a small fee for issuing Prepaid Credit cards. 

Who can use Prepaid Cards? 

Prepaid credit cards can be used by corporate and individuals. The uses could be manifold for both the categories.  

For Corporates 

Corporates can get many prepaid cards against their current account. The limit for each of the cards can be fixed by the corporate. They can be used for reasons like below 

  • For disbursement of salaries 

  • For disbursing tax-free meal amounts 

  • As gift vouchers during festivals or events 

  • For traveling executives to meet their day to day expenditure incurred at hotels, foreign exchange transactions etc 

  • To meet day to day office expenditure 

Additional Reading: Prepaid Cards for International Travel

For Individuals 

Prepaid cards work the similar way for individuals too. They could be used as 

  • As an add-on card for family members/youngsters/students especially where one would like to keep a check over expenses. 

  • They can also be used as an ATM card if allowed by the issuer. 

  • This card can be used for transactions on websites which needs to give your complete details like CVV, Expiry date of the card etc 

The Benefits of a Prepaid Card 

We know that a prepaid card comes with several uses. However, a single most important benefit of holding a prepaid credit card is the control one can have on spending.  It has better control than a debit card, as one cannot spend more than what is already loaded on the card. This proves to be a great way to get your financial act together.  

A prepaid credit card is also useful for those looking to build their credit score or those without any scores.  

Types of Prepaid Credit Cards 

There are different types of prepaid credit cards. 

Open Loop Cards: These cards act like any other card and can be used at almost all POS and for other transactions at approved banks 

Closed Loop Card: The usage of these cards is restricted and can be used only for pre-designated services. E.g.: A co-branded prepaid card that can be used only at certain outlets.  

Reloadable Cards: These cards can be reloaded at any time. One card can be used over and again 

Non-Reloadable cards: This kind of prepaid cards are just for one-time use. Typically, prepaid gift cards fall under this category.