Many of us use our credit cards to make purchases on items which we either want or need before we talk to our monthly budgets. It’s easy to buy something on credit without considering the payment that we’re gonna need to make on the account later and several months to come. If this sounds like something that you have a habit of doing, there is a solution that might be a good option for you. It’s called preloading credit card payments. While you will find pros and cons to the practice, it's really a good solution. Here is all you need to know about this solution to managing your finances.
What is a preloaded credit card payment?
Preloading charge card payments is a way to start your personal savings account for an item that you would like to buy. Instead of purchasing the item on credit and taking it home with you, the money is put on the preloaded card within the amount of a payment that's affordable. The money stays on the preloaded card until you have enough to buy the item outright. What this does for you, is that it helps you to keep the monthly credit card bills within reason also it saves you money on the interest charges which come along with credit purchases. The cash you spend stays on the preloaded credit card until you’re ready to use it.
What would be the benefits of preloaded credit card payments?
According to Fool Proof Me, there are two huge potential benefits to preloading credit card payments. The first we just discussed. It saves you the cost of the credit to purchase the interest charges. The second is perhaps even more important than the first. By preloading credit card payments, you’re keeping your monthly budget at the same level without adding any other obligations that might be hard to cover. It also serves as a test run. When you designate a payment to your preloaded account in the amount that the item would have cost in monthly obligations, it shows you if you can actually afford to make that kind of payment. It also teaches you discipline because you’re delaying the gratification of getting the site in your possession while making regular monthly payments as though you did buy. It’s an eye-opening exercise that teaches you what your budget can truly handle. When you get in a tight spot and also you can’t afford to make the designated monthly preloaded credit card payment, you don’t need to. But it will show you what would have happened if you made an impulsive purchase on credit.
Other advantages of delayed purchases
Aside from helping you to develop discipline inside your spending habits, there are other benefits of using the preloaded credit card payment system. If you are planning to purchase an item that would get you several months to pay off, it gives you time for you to think about if you really want or require the item. Sometimes we buy on impulse only to realize a short time later that the things we purchase aren't as useful or desirable once we once thought. It also provides you with more time to research the ratings on the item, to compare a variety of vendors for the greatest price, and to have a cooling-off period to ascertain if your emotions about having the item cool over a couple of months.
How do prepaid debit cards work anyway?
According to Investopedia, prepaid debit and charge cards operate similar to a gift card. You use cash to preload a specific amount of cash on them and the pre-loaded balance remains readily available for your use on the card whenever you want to use it. These cards can be used anywhere credit and debit cards are accepted. They are a good alternative to cash and the balance on the card is paid in advance. These are good options for anyone who does not or cannot possess a bank account. Most prepaid credit and debit cards come with associated fees for their use. It’s important to shop around and compare several of them so you can get the best possible deal. Preloading credit card payments can function much like a savings account at a bank, but you must remember to deduct the amount of monthly fees that are subtracted from the account if any.
Best prepaid debit and credit cards
Card Rates offers a few tips about finding the best deals on prepaid debit and credit cards. Before you choose a certain card it’s wise to consider your lifestyle and the features which will work the best for your situation. Some cards include no monthly fees. Card Rates recommends the NetSpend Visa Prepaid Card to avoid monthly fees. The PayPal Prepaid Mastercard is easily the most highly-recommended with no pin transaction fees. The NetSpend Visa Prepaid credit card is also best with no signature transaction fees with no reload fees. The American Express Serve card is the best with no ATM fees and also the Bluebird by American Express has no foreign transaction fees. These are merely a few of the available cards, but they're the top picks for saving you cash.
Should you preload credit card payments? The solution depends on your lifestyle and personal preferences. It’s an exercise that allows you to develop discipline in preserving money and avoiding impulse buying. It can benefit you to keep your monthly payments lower to provide you with a little more room in your budget for unexpected expenses. While the disadvantage to doing this is that you won’t have an item as soon as you want to own it, the perks of being familiar with your spending habits and managing your personal finance seem to outweigh the delay in the gratification of ownership.