Tips and Warnings for Navigating a Pre-paid Credit Card

In a world were most people are in debt in one way or another, I am always looking for a way to save a buck or two. I have found that prepaid credit cards can become quite helpful in stopping high finance charges and impulsive spending. I have put together a few tips and warnings I have discovered while using my prepaid card.

A pre-paid credit card is just another name for a debit card. You have an account somewhere. Typically it is a bank that is owned by a credit card company or another source.

Never before did I understand the difference between a credit card and a debit card. A credit card is just that, credit. You can use it to charge whatever you would like up until you hit your pre-set limit.

A debit card functions completely opposite. You can only spend what you first put into it. This is great to help you not over extend yourself.

However, there are quite a few downsides or limitations to this option. They begin with the fact that you are unable to use it at a gas station pump. This is when you just swipe your card outside without having to go inside to pay for your purchase. When you use a typical credit card at a pump it authorizes $1.00 just to verify it is a legitimate card.

When you use a debit card it must first authorize the total you are going to spend not just the $1.00. If you are trying to use this in the middle of the night, with no gas station in site you may just be up for quite the surprise.

The next issue I have discovered using this type of card is when you use it at a restaurant. We have all seen those nice little slips that the credit card machines will spit out that say, total, tip, and grand total. What this really means to you as a pre-paid credit card holder is they have just put a hold onto your account for the total plus 15%. This gives you the option of leaving a tip if you should desire to do so. The problem with this is most people do not leave exactly 15% of their meal for the tip. They tend to round to the nearest dollar or decrease it due to poor service. Since the amount of the transaction and the amount of the hold do not match 100% perfectly the hold will stay in place for up to 45 days.