How A Pre-Paid Credit Card Can Help A Loved One With Their FinancesBy Howie • Jan 31st, 2013 • Category: Credit Cards
People from all walks of life are increasingly finding that they are struggling with their finances. Vulnerable members of society like students, the elderly or even an unskilled workers are struggling to get by due to increases in the cost of living. Prepaid cards can be a practical way to help loved ones who are struggling. Without the pitfalls of cash like the risk of theft, loss and poor self-control, prepaid cards can be loaded with funds and topped up when necessary, without the risk of going overdrawn.
Giving a prepaid credit card as a gift
This is a particularly popular option with parents of students living away from home. Transferring money into your child’s bank account makes it all too easy for them to take it out as cash and spend it unwisely on unnecessary purchases or big nights out. If you give a prepaid credit card as a gift it is more likely that the money will be spent on essentials such as shopping and text books. Further more you can actually see what they’re buying with the itemised bills.
At the end of the month, if they need more money it is a simple matter for you to top up from afar, with most companies offering the option to top up online or over the phone. This is a much safer option than sending cash, or a card that has already been topped up to any significant value in the post, as it can end up very costly if this goes missing.
Prepaid credit cards as a way of managing money
As you cannot go overdrawn on these cards, once the money is gone, it’s gone. This might be a harsh reality at first, but at the end of the day, if you are relying on your overdraft or credit cards to get by every month, you are spending too much.
Because prepaid cards are easy to top up, even without the cardholder being present, they are a great way for you to help out a loved one if they are struggling at the end of the month. Discuss an amount which they will put on it every month for essentials and it should help the receiver to budget better. Going over the itemised bills together can be way to learn better spending habits and keep tabs on what the money is being spent on. However, the option is always there for you to load more money onto the card if it is needed. Putting the money on the card is a reliable way of ensuring it is spent as intended.
Using a prepaid credit card for safety
Many elderly people are not used to the idea of using a credit or debit card, and tend to carry around quantities of cash that the rest of us would frown upon. Giving them a prepaid credit card is a great compromise. They can still effectively withdraw money from the card at regular intervals as they would their cash, but it is much safer for them to carry around.
Although the receiver might find it difficult getting used to using the card itself, the fact that it is not linked to their bank account and cannot go overdrawn even if they lose it, might help them ease into the idea of using a card, whilst having the budgeting advantages of cash.
Which is the best prepaid credit card?
There are many different prepaid cards on the market, and the one that will be most suitable for you and your loved one will vary depending on how you want to use it. Most come with a fee for topping up. On some this will be a set fee, whilst on others you will be charged a small percentage. If you are topping up a large amount of money once a month then a set fee might be better, whereas if you will be topping it up little and often just to help somebody get by, a percentage top up might be a better option.
Look for companies that have simple fee structures and outline their charges in clear, easy to understand terms. That way, you know what to expect from the start.
By Gavin Whittaker
This article was written in association with Tuxedo Prepaid, a leader in the field of currency cards and prepaid technologies.
Gavin Whittaker is a finance journalist with many years of experience. Gavin excels in articles that explain the advantages of currency cards, presenting new technologies for credit card safety and analysing the financial markets and he is sharing his insight on these issues with readers of a wide variety of blogs, online- and print-magazines.