Pre-paid credit cards

I have known of pre-paid mobile phones for some time now; the market for the pre-paid credit card is a new phenomenon. Well known companies like Coles, ING, Fujitsu, Mitre 10, Dulux or Hewlett Packard offer pre-paid credit cards for their customers - this appears to be a growth industry.

I initially wondered why such a product would be introduced when a charge card such as an American Express or Diners Club International is available. Firstly, Amex and Diners Club aren't cheap, they charge a premium to issue a card. They are not accepted everywhere and vendors don't like them due to the fees involved. Ok, so that rules them out as they are chasing the premium market.

The modern cashless society relies on online financial transactions and plenty of people have maxed out their credit cards as the banks are intent on raising limits at any opportunity. Now you can engage in online shopping as you have a credit card to purchase goods and services. Unfortunately, modern society requires immediate access to credit and many people have multiple credit cards with high credit limits - this is their financial downfall.

A pre-paid credit card is a brilliant idea, you have access to financial services like Mastercard and Visa without the ongoing costs of credit card debt. To me, this sounds like a debit card and not a credit card. Looking at the Coles pre-paid cards, I see it cost $5 to purchase the online and gift cards and is able to be loaded with $1000 of credit.

The re-loadable Coles Platinum Mastercard costs $10 to purchase and earns 1 Flybuy point (their rewards program) for every $2 spent; the card may be loaded with $1000 credit or on application be increased to $10,000 credit so you just lost your advantage of a pre-paid credit card and now have a standard credit card with a pretty high limit.