by Joseph Kenny | 11/12/08

Even as U.S. credit markets are tightening in the face of the country's serious economic challenges, more Americans are make use of prepaid credit cards in order to help them control their spending and ultimately reduce their dependence on using credit at all. This new trend goes for both major credit players, Visa and MasterCard. Similarly, the number of prepaid debit cards being released by card companies has achieved enormous growth.

According to figures released by the Federal Reserve Bank, the total amount of US Consumer debt had reached $2.577 trillion by the end of August 2008. This figure did not include mortgage loans.

Given the change in the economic climate, more Americans have decided to reduce their spending and commit to cutting down debt. Fears of widespread financial loss and credit damage have made prepaid debit cards and credit cards an attractive option for those who wish to have access to services other than cash, but minus the risks of increased debt loads and overdraft fees.

With stricter policies closing the door to credit for many consumers, viable alternatives for spending are being searched out. In some cases, simple cash has become a liability in the fast paced world where swiping a card is to convenient. With prepaid debit cards, those consumers who would use cash can now access financial services they would not be able to use before.

Prepaid credit cards and debit cards are being used to manage finances while providing the flexibility of traditional cards as a way to pay bills online. Rental cards and airlines tickets can be purchased with prepaid credit cards; consumers can even pay at the pump with their prepaid cards.

Essentially, prepaid cards are just like traditional credit and debit cards. There are network branded prepaid cards, such as those offered by Visa and MasterCard that are issued by regulating institutions or banks. The obvious departure point between traditional cards and prepaid ones is that you do not need a line of credit or even a bank account to obtain one. You simply need cash available to place on the card so it can be activated for immediate use.