Sometimes life’s prior financial mistakes can show up on credit reports and linger there for quite some time. The FICO score is one that can greatly impact all credit situations and could affect you when you are trying to get a cell phone, credit card, a home loan, or a car loan. All of these involve credit checks. One FICO score that is bad can make all of the difference. This score is used by creditors to help determine a person’s ability to be able to pay back debts. Because of soaring interest rates and credit scores that are flawed, these credit scores can potentially cause payments toward loans to go from a manageable payment instead become a payment that causes a person to stretch their payments.

Lower credit scores can deter a person’s options for credit. This could result in a person needing to rely on payday loans or cash advances. These types of borrowing money cover expenses that often recur such as mortgages, car payments and credit card bills. The interest on these loans is usually high because they are usually a last resort for someone who needs fast cash. However, there are other alternatives to financial woes.

For people with lower credit scores, one option that is rarely utilized is secure prepaid credit cards. These credit cards function much like debit cards that are connected to a bank account but using them can help to build a stronger credit. When a person pays money toward a credit account, it is accessible similar to a credit card. It often is secured with a deposit. Purchases that are made are loaned to the consumer and the deposit is just a part of the credit limit. Although these cards are prepaid by the consumer, it helps to build credit because the use of it is reported to credit bureaus. Other prepaid credit cards that are not secured because it does not help to build a credit line because all of the money is deposited by the card holder rather than just a portion of it.

A team of Harvard and Oxford Business School professors recently conducted a study on these prepaid credit cards. They found that they were easy to access, use and have other additional features that could help steer a person clear of using pawn shops, cash advances and payday loans. The D2D fund experiment developed an additional savings feature used for the Upside Visa prepaid credit card that includes the ability to use a mobile app that sends reminders when withdrawals are made from the account. This can help a person easier manage their money and help them to save money that could otherwise be used in case of emergencies. This feature is known as the “rainy day reserve” and was designed to help card holders to easier manage and improve their financial situation by establishing savings accounts. People who have savings accounts are less likely to utilize payday loan agencies and this is all due to the new feature.

The study indicates that the reliance that people have on alternative fast cash options is a valid claim. Approximately half of the card holders that used secured prepaid cards said that this feature was something that they would use because it was easy. A staggering 79% of these people studied indicated that the feature on this prepaid credit card has already helped them to save money. The mobile app seems to be the method that helps the most because it encourages the consumers to save money rather than continue to splurge.

Being able to have a fund set aside for savings can greatly improve a person’s financial situation. There are several instances in life where people have financial emergencies and have nowhere to turn. By having a safety net in place, this can help these individuals have more financial freedom and independence. People with low credit scores typically have more struggles with finances and fewer options are available to them when an emergency arises. By using prepaid credit card features like those of the “rainy day reserve,” people are becoming smarter with their finances. While payday loans and cash advances are an instant solution, they can also create hardships when it comes time to pay them back because of the high interest rates. In order to refrain from taking a trip to the payday loan office, it is wiser to plan ahead and save.