How Prepaid Credit Cards Help Canadians Stay Out of Debt

Even with high-paying jobs, people may still be deep in debt. It happens to everyone, so there is no shame in being in debt. Having said that, it is still important to have control over one’s spending. 

Sticking to a set budget is one way to do that. Unfortunately, credit cards sometimes give people a fake sense of security. Many get careless with the way those plastic cards are used. An excellent way to avoid overspending is to opt for prepaid credit cards. 

In this post, Debt Helpers is going to dive deeper into how prepaid credit cards can be used to help people stay out of debt: 

First, What Is a Prepaid Credit Card?

Prepaid credit cards are not to be confused with the 76.2 million “traditional” credit cards used by Canadians. 

The big difference is that instead of having to pay the credit balance later, prepaid credit cards are already preloaded with the user’s money upfront. 

Prepaid credit cards are also called ‘reloadable’ credit cards.

Benefits of Prepaid Credit Cards

The preloaded amount can be used to make purchases without paying interest since there is no outstanding balance.

Prepaid credit cards are safer than carrying cash since the money is stored on the card and can be quickly frozen if it’s lost or stolen.

The cardholder can only use the funds they loaded on the card. This is an advantage in terms of budgeting and spending control. Prepaid credit cards also offer consumers several ways to monitor their spending. 

The prepaid credit card number is not linked to the user’s bank or credit card account. No personal information is stored on the card.

Prepaid credit cards offer the opportunity to build a credit rating and history, which is especially useful for people who are new to credit. 

Unlike debit cards, prepaid credit cards do not come with a bank account attached.

For this reason, prepaid credit cards are popular with people who have bad credit or no credit history.

An individual can open a programmable prepaid credit card account at any age. Therefore, prepaid credit cards are extremely useful for teenagers who have reached the age of majority at 18 years of age but are not earning enough to afford the expenses of having a traditional credit card.

How to Stop Uncontrolled Spending Using Prepaid Credit Cards

How can a prepaid credit card be leveraged to help a person stay out of debt? 

Users can set a monthly budget and use only the card for purchases without touching other accounts or spending cash on hand. Once the card limit is reached, the user will have to wait until the next month before making another purchase. In a nutshell, prepaid credit cards allow users to put a hard cap on spending and not worry about credit scores. 

Conclusion

Being in debt can be daunting. Nobody wants the burden of thinking of ways to pay back a considerable amount of debt. The first step to breaking free of debt is taking control of one’s spending. Unfortunately, traditional credit cards are catalysts for overspending as it’s hard to keep track of purchases made when one’s not handing actual money. Debt consultants agree that prepaid credit cards can help prevent overspending because there is a limit to what a user can spend in a month. It also frees users from the high-interest rates that come with traditional credit cards. When a person sticks to strictly using prepaid credit cards for spending, the risk of spending beyond one’s means is also avoided.

Debt Helpers have some of the best debt consultants in Canada who can help clients achieve goals of being debt-free through strategies that work. Contact Debt Helpers to consult with an expert today!