Preloading a Credit Card [How To, Benefits, and Tips]

Using your credit card while you are on holiday is safer than carrying a lot of cash in your pocket. However, you won’t avoid interest and other bank charges, especially if you go over your credit limit. You can avoid these credit card charges by preloading a credit card.

You can preload your credit card by ‘depositing’ the estimated amount that you plan to spend on your holiday somewhere. Credit card preloading is allowed by credit card companies and can help you save on bank charges and interests.

If you preload a credit card, you will avoid paying interest and other bank charges. When you are using your preloaded credit card, it is as if you are withdrawing the money that you have deposited with the bank.

Read on to learn more about credit card preloading, its advantages and benefits, how to do it, and other related topics.

Preloading a Credit Card

preloading a credit card

If you are looking for interest free-spending and no bank charges on your withdrawals, preload your credit card.

Preloading a credit card can be done by ‘depositing’ an amount of money you think you will be spending on your holiday trip or for some expense you are anticipating.

Pay the Credit Card Company More Than What You Owe

How to preload a credit card? One way to preload your credit card is to pay the credit card company an amount that is more than what you owe them. If you already estimate the amount you will spend on your holiday, add this amount to the actual amount you owe.

This excess amount will be reflected on your credit card account as ‘credit balance.’ You can then use this credit balance to pay for the expenses you will incur while you are on vacation somewhere or to pay for something you want to buy without incurring interest and bank charges.

Overpaying your credit card bill is a way to ‘deposit’ money into your credit card account. It will remain on your credit card as your spending credit. A majority of the credit card companies list this excess amount as a negative balance on credit cards.

You can also preload a credit card by contacting your credit card provider or financial institution. Ask them about preloading and how to preload. Usually, most companies, will let you transfer money onto your credit card in order to preload it.

Benefits of Preloading Your Credit Card

It’s not just you who feels the urge to buy the latest gadget or some other excessively promoted item even if you don’t have the cash. Advertisements, promotions, and marketing gimmicks for consumer items are too much for the average person to take.  

If you see the folly in all these and search for a better way, credit card preloading might be your way out.

There are huge benefits in preloading your credit card instead of binge buying using your credit card:

1. Save on Cost of Credit

Preloading your credit card will help you avoid the cost of credit payments. In other words, you will be able to save money instead of paying monthly interest charges. The money you save could be enough to make another cash purchase.

2. To See If You Can Afford the Payment

Preloading your credit card will also help you see if you can keep up with the monthly payments.

When you decide on the amount you will set aside as your monthly payment for the item you want to buy and then start preloading that amount on your credit card payments, it will serve as your test run.

If you can’t keep up with the payments, you know you can’t afford the item. But if you have already locked in your monthly payment with the credit card company, you have no way out but to fulfill your obligations or else.

3. Monthly Budget Will Be at a Manageable Level

It is easier to manage your monthly budget if you preload your credit card payments. You will not be incurring extra obligations that you may not be able to cover.

4. You’ll Be Able to Discipline Yourself

Making monthly payments for an item as if you already have it in your possession instills discipline in yourself. If you succeed in this endeavor, it is you who will get the most benefit.

You will know that you have the ability to control your urge to buy something that you can’t afford. It will be more difficult for you to buy something just because credit is available.

5. It Will Give You the Benefit of Time

Planning to buy an item that will take you many months to pay will allow you to think about whether you really need the item or want it. While preloading your credit card payments, you will have more time to consider the item.

Purchasing it right away through your credit card will not allow you to ponder if the item is really a need or just a want. The problem is with credit card buying is that you are already stuck with the payments.

Preloading instead of credit card buying also gives you enough time to see if the item you want is the best or if others are better and more affordable. You will have the time to compare similar products before buying the right one.

Preloading also forces you to wait before buying. It will enable you to buy with your mind and not with your emotions. You won’t be influenced by the urge to have the item right away. The waiting time will help you see if you really need the item or not.0

6. Preloading Your Credit Card Will Save Money

preload a credit card

Adding an extra payment to your credit card bill will enable you to avoid interest charges. Many travelers are already using this strategy. However, it can only work to a certain extent.

You can prevent interest charges on cash advances as long as the extra money you added to your credit card is more than or at least equal to the amount you will withdraw.

Only the normal service fees will be charged to your account. This is usually $4 or 3% (whichever is greater) of the withdrawn amount.

7. Estimate Cash Advance Fees

All credit card companies charge service fees for cash advance transactions. That includes money withdrawals or foreign currency purchases using credit cards.  

If you plan to withdraw money while traveling overseas, estimate beforehand the money you will pay for cash advance fees before choosing a particular credit card. Multiply the amount that you expect to withdraw by the fee for a cash advance. This is usually given in percentage.

For example, if your estimated traveling expenses are $2500, that is the bulk of the amount you will preload on your credit card. Multiply this amount by 3%, and you will get the cash advance fee of $75.  

This is the amount that the credit card company will charge you when you withdraw the total amount. So, add $75 or a little more to the original $2500 when you preload your credit card. When you withdraw $2500, the credit company will get the extra $75 as your payment for their cash advance fee.

If you don’t add this extra amount when you preload your credit card, they will take out $75 from your $2500 when you withdraw it. Instead of the full $2500, you will only receive $2425.

Take Note Withdrawal Limit Still Applies

You should also remember that credit card companies limit the daily withdrawal amount, which is usually lower than your credit limit. This withdrawal limit still applies even if you have preloaded your credit card.

Also, you should always keep track of your credit card balance. If you are spending foreign currencies, it won’t be easy to know the exchange rate until the transaction is reflected in your credit card account.

8. Help to Prevent Mismanaging Credit Card

Preloading credit cards is one strategy that can help you if you are already caught in this habit of mismanaged or uncontrolled credit card buying. This strategy is technically called preloading credit card payments. It can be a way you can solve your financial problems.

9. One Way to Start Savings Account

Preloading your credit card payments is one way of starting a savings account for a particular item that you want to have. It can be a vacation somewhere in the Caribbean or a 65” smart TV, or the latest smartphone.

The usual method is to buy the item using your credit card and hopes you will keep up with its monthly payment. Instead of doing that, preload a credit card with an amount that you can afford to pay per month.

You will add or preload this amount on your credit card every month. The money stays there until the total amount is enough to pay for the item you want. This strategy will enable you to keep the monthly bills on your credit card within your ability to pay.

Again, preloading a credit card-how do you do this? You can preload a credit card by depositing a certain amount to your card that you plan on spending in the future. By doing this, you can avoid paying for interest charges and a whole lot more benefits we discussed above.

Advantage of Preloading a Credit Card vs Not Preloading

Most consumers go into a ‘purchase and pray’ condition when faced with a buying decision involving their credit cards. They thought of buying something, and then they load the payments in their credit cards.

In the following months, they hope and pray they’ll have the funds to keep up with the payments. This is the system by which most people are caught in financial situations above their heads.

Way Out of Tight Financial Situations

credit card preloading

Preloading your credit card payments is the way out of tight financial situations. With this method, you will make sure that the purchase you will make will fit your monthly budget. That means you will be forced to make a monthly budget and strive to make it work.

Buy Items at the Right Time

It will also help you buy only the right item at the right time. There will be lesser instances where you feel remorse after a few months of buying a certain item.

Practical Application of Preloaded Credit Card

Are you thinking of buying a smart TV, the latest smartphone, or even a car or a house? For practical purposes, let us assume you are thinking of buying the latest and most advanced smartphone on earth. You have estimated that it will cost you around $50 per month.

If you will buy it through the preloading method, here is how the process will go:

  1. Ensure that the $50 a month purchase is within easy reach of your budget;
  2. Pretend that you have already bought the item through your credit card;
  3. Preload $50 on your credit card the next time you pay your monthly bill;
  4. Go to a bank nearest you where your credit card is honored and set up a savings account;
  5. Arrange for an automatic transfer of the $50 from your credit card to your savings account;
  6. Do this for a couple of months and see if you are up to it; and
  7. If you are religious in practicing this, you will have an amount of money in that bank that you can use to buy the item or another item C.O.D. if you have changed your mind.

Conclusion: Preloading a Credit Card

Preloading credit cards is an accepted practice in the credit card business. Many people do this to save money on credit card purchases. You can do it by ‘depositing’ money into your credit card account.

The amount of money you need to deposit should be equal to or more than the amount you plan to spend while you are on holiday or for any expense you are anticipating.

When you need the money, use your credit card, and the expense will be paid by the money you have deposited. It is just like you are withdrawing cash from an ATM.