« »

Monday, February 14, 2011

How temporary credit cards work

Temporary credit cards
Temporary credit cards have prepaid balances
Temporary credit cards include prepaid credit cards and temporary credit card numbers. These cards may require a pin number, expiration or signature for use and in some cases are linked to longer term credit card accounts.

The temporary credit cards that are pre-paid do not have credit balances but rather available credit, however, some may be reloaded with new funds.

Temporary credit cards offer their holders security, transaction safety and are have less capacity to ruin one’s credit rating than traditional credit cards.

These types of cards are issued by traditional credit card providers such as Visa, Mastercard and American Express, however several online temporary credit card options are also available from financial service providers. An example of a Temporary Gift Credit Card is illustrated at the Visa USA website that provides some of the temporary credit card services discussed in this article.

According to American Express, temporary credit cards that are dubbed credit gift cards are actually ‘prepaid payment devices’. So while an American Express Credit Card may offer a true credit limit, American Express gift cards do not. Nevertheless, these cards are credit cards in the sense they can trace payment history and transaction details like a credit card. Temporary credit cards can be used anywhere where payment for major credit cards are accepted provided the temporary card issue is or is affiliated with these credit service providers and locations.

Advantages and disadvantages of temporary credit cards


There are several advantages and disadvantages to temporary credit cards. Temporary gift cards may restrict use by allowing one time use of the card number only. Moreover, for temporary credit cards linked to real accounts, numbers can be created for one time purchases. Another advantage is the security these cards offer. That is to say, if the card does get stolen, it’s just the card that’s stolen, the money on it and nothing more. Granted, having any card stolen is a disadvantage but payments can still be cancelled and the card replaced according to Visa USA. Some advantages of temporary credit cards are listed below:

Advantages:

• Protect against identify theft
• Require PIN instead of signature
• Safer than cash
• Can be replaced

Gift cards such as the Visa gift card do not have credit limits in the traditional sense of the word. Moreover, temporary credit cards such as plastic Visa gift cards may only be used to purchases as much as the card has been prepaid with. These cards are not necessarily re-loadable as previously mentioned and may carry a small non-refundable balance that requires an exact or larger purchase than the amount of the card to redeem its full value.

Disadvantages:

• Pre-paid credit
• May not always be used for reservations
• Pinless cards can still be used if stolen
• Card expires like regular credit cards

Online vs plastic credit cards


Another version of temporary gift cards are the online version. An example of the online version is illustrated at the Discover card online credit services website. These are not physical cards but rather temporary card numbers that have cash value associated with them. In some cases the numbers are generated when bought and may be have additional value put on the card when its value diminishes. In other cases, the temporary credit card is really an extension of a real credit card number in the sense that it is linked to a real account but not directly and only for a limited time. These temporary credit cards provide security by limiting use of the card especially if a pin number is required to utilize the card for purchases.

Thus, the pin codes that may be present with online temporary credit cards may not be with plastic temporary gift cards which are similar, but not exactly credit cards. Online cards and plastic temporary credit cards may offer liability protection depending on the issuer and processor and there may be a fee associated with both the generation of the online temporary credit card number and the issuance of a plastic temporary credit card. For example, the Deluxe Card Visa gift card from giftcard.deluxe.com has a processing fee for phone orders, card issuance and some shipping services requested with purchases made with the card.

Temporary credit cards are forms of payment that protect the users identity, may or may not be linked to an actual credit card account and for those that aren’t have a prepaid balance. Plastic temporary credit gift cards are processed by traditional credit card processors and issued by a variety of issuers such as major banks or online financial service providers. Some temporary credit cards require pin numbers for use in addition to the card number whereas others make use of signatures, card number and expiration date for verification and processing.

The fees that come with some temporary credit cards may be a deterrent to their use, but not all fee structures are the same. Such being the case, shopping around for the perfect temporary credit card may be worth it for peace of mind when making large or online purchases over unfamiliar websites.

Image license: 401(K) 2012, CC BY-SA 2.0