Prepaid credit cards can help young people to learn about debt management, it has been claimed.
Chris Reddish, chair of the Prepaid International Forum, said that the products can be used as a “safe” method of teaching youngsters about finance, as they remove the prospect of debt being built up.
The cards can lead to people having “financial responsibility, but in a managed way”, he commented, adding that they do not offer the “temptation to spend more than they can actually afford”.
In addition, Mr Reddish explained that the items can open up “new avenues” for those who have had debt issues in the past, allowing them to make card payments without their credit history being taken into account.
This could give up to seven million people who are not allowed to have a bank account the ability to buy things through mediums such as the internet, he noted.
Meanwhile, David Kuo from the Motley Fool has recommended that borrowers pay off more expensive forms of debt, such as credit cards, before other loans.
By Jamie Price