Photo: largeprime via flickr
If you’re anything like me, you probably looked at your calendar today and wondered how on earth we could possibly be in holiday-planning territory already.
Twitter is buzzing with Black Friday tips and every deal-hound on the web is speculating about what time of which days consumers should hit up airlines for the best rates on flights home.
A good way to manage your budget as the holidays approach might be to throw your pennies toward a prepaid credit card. No, I’m not talking about those annoying credit company-backed gift cards you can pick up in the Walmart check-out aisle.Prepaid cards basically function like a checking account—without all those annoying debit card fees. You set up a card with a security deposit that determines how high the limit will be and are free to use it as you wish.
But before you commit to a prepaid card, you should keep some important things in mind.
Make sure you’re getting one for the right reasons.
Lots of consumers flock to these cards because their credit scores are so crappy that they couldn’t get approved for an actual credit card even if they tried. Prepaid cards don’t require a credit check at all so they’re much more accessible.
Don’t expect them to improve your credit score, because they can’t.
In fact, if a prepaid card advertises itself as a way to sweeten your rating, you should run the other way, the Wall Street Journal’s Jennifer Waters advises. They could be rife with fees to start up and activate the card, not to mention others buried in the fine print.
Keep an eye on fees.
Some prepaid cards charge fees for ATM withdrawals and if you lose them or they are stolen, they aren’t backed by protection policies like regular credit and debit cards.
It’s not all bad news though.
The beauty of these cards is that they’re reloadable (sometimes for a fee); you can’t go over your limit; and there is no threat of staggering interest rates or late fees to send you reeling into debt.
They’re a great tool for parents who might want to help their kids in college with gas or grocery costs or for someone looking for an easy way to self-manage their spending as the holidays approach.
Prepaid may be a great way to approach the holiday shopping season and reel in your spending, but just be sure you’re treading carefully before you take the plunge. For more on what to look for, check out more of Waters’ tips here.
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