Prepaid credit cards keep you debt free

5 December 2007

Getting yourself a prepaid credit card or a debit card as they are more commonly known is a great way to enjoy the advantages of purchasing goods and services with plastic without having to go into debt to do so..

All the major banks, except for the Commonwealth Bank of Australia, are now issuing their customers with Debit Cards.

A debit card works just like a credit card in that you can make purchases or draw on cash by simply swiping your card at the grocery store or going to an Automatic Teller Machine to withdraw funds like you do with a cash advance.

The advantage of a debit card is that the funds you are drawing on are your own. You put your own money into the account and then you just deposit more into it when you need to do so.

The advantages of a prepaid credit card don't stop with not getting yourself into more debt.

A debit card can also have a savings account attached to it so you can use online banking to transfer funds into your debit card account to keep it in credit. This way you will always have access to some emergency funds should you need them, just like you would if you had a credit card except this way it won't cost you an interest fee if you draw on those funds.

Not everyone is eligible for a credit card and yet they want and need to have access to one for things like making online purchases of goods or buying movie and concert tickets over the internet rather than waiting in a queue.

A debit card is freely available to anyone who opens up a bank account.

Another advantage of having a debit card is that you don't have to pay any annual fees on your card or any credit charges on purchases if you make a late payment because your always using your own money.

Probably the best long term advantage of a debit card is that you can teach your kids to use their plastic properly without racking up a debt that they can't repay, as happens with many who use a credit card before they have a full understanding of the consequences that a large credit card debt can have on their lives in the next few years.

If you give your kids an allowance as many parents do to help them with their cash flow as they go through university or other forms of higher education, using a debit card can be far cheaper and easier way for them to learn about being respectful with their plastic than a student credit card may be.

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