What Are Prepaid Credit Cards?

Prepaid credit cards can really come in handy – especially if you have poor credit. For instance, have you ever tried to rent a car or book a hotel room only to learn that you need a credit card to do it?

If you are a person with poor or just plain bad credit, a prepaid credit card may be a lifesaver. These credit cards are issued by the three major credit card companies, Visa, Mastercard and American Express. They are just like regular cards but with one main difference.

Prepaid credit cards are actually more like gift cards. You can load money onto the card and then use it at your favorite stores and restaurants just like a regular credit card. The money you spend is subtracted from the amount of money you deposited onto the card.

So for example, if you loaded $500 onto your prepaid credit card and then spent $100 on shoes, your remaining balance on the card would be $400. Once you have spent that $400, you would need to deposit more money onto the card.

One of the main advantages to using a prepaid credit card, is you don’t have to think about due dates, late payments or interest. None of these factors apply to prepaid cards.

There are some fees to be mindful of if you are considering a prepaid card. Most cards have an activation fee as well as a small monthly fee. Some may also charge fees for things like withdrawing cash or checking your balance. Be sure to get all the information about extra fees.

Prepaid credit cards are a great solution for students of all ages because parents are able to control the amount of money being put on the card. This helps teach kids the value of a dollar and how to spend wisely.

So if your credit is not in the best condition, a prepaid credit card may be just what you are looking for. You can be approved for this type of card no matter what your credit history is and these cards do not influence your credit score.

Originally posted 2009-03-09 16:22:12.