Prepaid Credit Cards

What is a Prepaid Credit card?

A prepaid credit card is a credit card that functions basically like a regular credit card, but the only difference is that they are completely controlled by the user, because instead of borrowing against a credit balance, the funds on credit card is prepaid by the holder who can use them according to needs. The credit limit for prepaid credit cards is the deposit made by you when you opened the credit card account, which also allows you to add more money in the account when funds are depleted. Prepaid credit cards are ideal for those who are looking to build credit, or have a bad credit history, and have teenagers or children in the household.

How does it differ from Debit Cards?

Prepaid credit cards can be very similar to debit cards, but they are not same. For instance, when you use debit cards to purchase goods and services, the amount will be automatically charged to your bank account. However, with prepaid credit cards, the amount will be deducted from the balance you have already paid on the card.

Advantages of a Prepaid Credit card:

There are some advantages of using a prepaid credit card in comparison with traditional credit cards.

* A prepaid credit card user cannot go into debt because the holder cannot use any amount above the balance that has been deposited when the credit card account was set up.
* A prepaid credit card does not carry interest charges but can function like a traditional credit card in many ways.
* A prepaid credit is useful when building credit for people with bad credit history because the payments made may be reported by some companies to the credit bureaus.
* Depending on the amount on the balance of the card, the ‘credit line’ is variable.

Things to consider when applying for a prepaid credit card:

* The features and fees charged on prepaid credit card vary between companies.
* There can be limits on the amount you prepay, as well as a minimum limit that is required to stay on the card.
* Find a credit card company that reports to the credit bureaus if you’re looking to build credit with prepaid credit cards.
* Do not go for prepaid credit cards that require you to pay a high one-time setup fee.
* Make sure you’re not being charged absurd shipping fees when applying for prepaid credit cards online. Make comparisons and conduct a little research while you’re online searching for a prepaid credit card offer.
* Some prepaid credit card offers may charge you hidden fees, such as a fee against any unused balance on the card each month. Prepaid credit cards should be able to let your card remain unused for a considerable period of time before charging you a fee.
* Never turn to prepaid credit cards that charge you an automatic monthly fee.
* When getting prepaid credit cards, also keep in mind that companies may charge you several other fees including application fee, ATM withdrawal fee, a purchase fee, monthly transaction limit fee, etc.