Pre-Paid Credit Cards vs. Regular Credit Cards

How to Avoid a High APR, Serious Debt and Money Problems

Feb 22, 2009

Customers using charge cards regularly accumulate high APR serious debt. A pre-paid credit card helps a consumer to manage household bills and prevent money problems.

Recent research by the CCCS, a debt counselling charity, found that, "The average UK adult has credit card debt approaching £2,300. Clients of CCCS owe on average over £14,000 on credit cards. CCCS counsellors are now dealing with almost 50,000 credit card related debts every month, 3.5 times more than three years ago."

Due to the high APR, a traditional credit card shouldn't be seen as a source of long term borrowing. Sadly, many people choose to only make the minimum monthly payment on outstanding credit card debt. This has created serious debt for many individuals and made it virtually possible to cover all household bills. Can a pre-paid credit card help?

What is a Pre-Paid Credit Card?

There is no credit facility on a pre-paid credit card meaning that no credit check is necessary. Instead, individuals are able to load money onto their cards. A pre-paid credit card is designed for people with bad credit and/or who want to manage their personal finances more effectively.

Avoid High APR Serious Debt Problems with a Pre-Paid Credit Card

Those that have a history of making only the minimum monthly payment on credit card debt stand to benefit greatly from a pre-paid credit card. Whilst having no credit facility may be construed as a negative by some, it is actually beneficial to many people. It means that individuals can only spend money they actually have, thus helping people to manage their household bills and avoid serious debt.

Unexpected Household Bills

A traditional credit card is regularly used to pay emergency household bills. However, many people don't just use credit for emergency situations. Paying a small amount of money onto a pre-paid credit card each week is an effective way of budgeting for unexpected household bills. Whilst there is a charge on any money loaded onto a pre-paid card, it definitely helps people avoid credit card debt and money problems.

Bad Credit is No Obstacle to a Pre-Paid Credit Card

As there is no credit check, a pre-paid credit card is ideal for those struggling with a bad credit rating. Whilst there are traditional credit cards available for those with bad credit, they attract a high APR of upwards of 35% on outstanding balances. This only serves to create serious debt problems.

A credit card is simply a means of paying for goods and services. It should never be used in the same way as an unsecured loan due to the high APR credit card debt attracts. If unable to manage household bills effectively, a pre-paid credit card may be a perfect solution.

The copyright of the article Pre-Paid Credit Cards vs. Regular Credit Cards in Personal Budgeting/Finance is owned by Asa Ghaffar. Permission to republish Pre-Paid Credit Cards vs. Regular Credit Cards in print or online must be granted by the author in writing.