Credit cards, debit cards, reloadable credit cards. Why do we need so many different cards? Aren’t they all the same anyway? What is the point to these new reloadable credit cards, and what advantages can they possibly have? As I began to look for a way to provide some means of dealing with emergencies for my teenagers, I realized that there are a lot of options. Using a reloadable credit card was suggested to me, so I decided to look into it a little more closely. Here is what I found.
I really did wonder what could possibly be beneficial about a reloadable credit card. I discovered that these reloadable cards have advantages over debit cards, credit cards, and cash.
First, the reloadable credit card can be used exactly the same way as a regular credit card. In most cases, so can a debit card, but it does have distinct limitations. Consider this scenario. Your teenage daughter is away at college for the first year. She is a six hour drive from your home, and her car breaks down. The garage is happy to take her debit card, but the car rental agency will not. She has no other way to secure transportation, and she finds herself three miles from the dorm without a ride.
In this scenario, if your daughter had a reloadable credit card, she could have paid the garage and reserved her rental car. Rental car companies and hotels often won’t accept a debit card for reservations, but they will accept a reloadable credit card.
Another advantage reloadable cards have is over credit cards. Giving your child a revolving credit card is something we all consider because we don’t want them facing emergencies with no way out. Yet teenagers and young adults often have very bad spending habits, and they take your credit score down with them. There is a lack of accountability in a traditional credit card that young people tend to take for granted, and mom and dad usually bail them out to spare their own credit rating.
With a reloadable card, mom and dad don’t have to cosign. You can work out your child’s monthly budget with him and make sure he knows how much he has to spend. If he runs out of money before the month is up, he will have to figure out how to eat until you replenish his card. This is a great tool for training our kids how to be responsible with a traditional revolving credit card and a budget. You preset your child’s budget, and your credit score doesn’t suffer when Junior makes a bad decision and spends all his money. Plus, these cards, because you put money in them up front, have no interest charges for the purchases you make on them. That is a hefty savings in itself as we watch interest rates going up!
The third advantage comes over the cash option. Imagine the risk of carrying $500 in cash versus a credit card with $500 prepaid. Not to mention, while cash can be spent and easily unaccounted for, using the reloadable card will help you and your child track spending habits and evaluate if and where changes need to take place. I don’t know about you, but if I have cash, I spend it like water. Keeping up with all my charges instead of carrying cash has helped me see where I am overspending and make adjustments to my budget.
Another advantage reloadable credit cards have is their protection against unauthorized charges. If your child loses the card, or it gets stolen, you do not lose the money that is used without your permission. Most credit cards also have this protection, as do debit cards, but you are not left to untangle the knots these unauthorized transactions create in your bank account or credit report. The reloadable card is not tied to any bank account or credit report, so the consequences to those institutions and your credibility are nonexistent. You may have to pursue the company to get the money refunded, but that is a relatively small hassle .
These cards are also great for that teenager in your extended family for whom you just can never get the right gift! You can choose an amount of money you want to put on a card and give that as a gift. Then the teen can purchase whatever she wants, and you, once again, are restored to favorite relative status.
Choosing a reloadable credit card over a debit card, traditional credit card, or cash, is a wise thing to do, particularly if you struggle with low credit scores or if you have teenagers you want to provide for while setting them up for future financial success. You will avoid fees, interest rates, overdraft problems, and losing track of where your money is going.
Reloadable credit cards are available through many different sources. You can obtain a name brand card, such as Visa or Mastercard, without fees, credit checks, or interest payments. These reloadable cards can be used anywhere traditional credit cards are accepted.
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