The Pro's and Cons of Prepaid Credit Cards
As kids grow up, parents often look to make their teens more responsible by getting them prepaid credit cards. The advantage of prepaid credit cards is that once the money is used up, the individuals cannot frivolously charge themselves into debt they cannot pay. Prepaid credit cards are simple ways for parents to ration money to their children as they enter college as well as go one trips and vacations without the parent present.
Most of these credit cards are created by most major lenders for parents and are financed by the parents either by cash or by credit as well. The parent can then call into the bank or financial institution to get the prepaid credit card filled with a certain dollar amount. Upon completion the user can then spend that amount of money only, until the card is replenished.
Major credit companies such as Visa, MasterCard and Amex, as well as other department stores offer these cards. Prepaid credit cards have become widely accepted since it curtails the unnecessary spending of the individual. It makes the son/daughter accountable to themselves and what they have spent the money on. Some prepaid credit cards do produce detailed statements that the parent can analyze their spending.
The downside to prepaid credit cards is that it does not reflect on the credit worthiness of the individual. The parent reaps the credit reward and the child does not. It also can be bothersome for the parent to call in and replenish the card. It really does not teach the child how to spend wisely. Some prepaid credit cards cannot be refunded, so if an item is returned to the store for a refund the card may not be properly credited to the child's account accordingly.