Prepaid credit cards are one of the many financing options available to individuals with less than perfect credit. This particular class of credit card allows for the full functionality and range of card use as a regular unsecured credit card, but requires that the cardholder make deposits (also known as “reloadingâ€) as the funds are depleted. Think of it as a checking account without actually opening the account through a bank – you use the card issuer of your choice instead.
Who Would Benefit from a Prepaid Credit Card?
Most prepaid credit card holders meet any one of the following three criteria:
- Have a moderate-to-severely damaged credit score. People with fair-to-poor credit ratings will not qualify for unsecured credit cards or may only qualify for those with outrageous interest rates, so a prepaid card is a way to make use of the handy nature of a credit card without the usual credit checks or other hassles that are required traditional credit card companies.
- Have no credit history or would like to rebuild their credit history. Some people who don’t have any credit history at all prefer to get used to having a credit card by getting a prepaid card first. Think of a prepaid credit card as the training wheels on a bicycle – it teaches you how to keep track of your purchases without putting your credit score in jeopardy.
- Do not wish to have ties to banks. A growing number of Americans prefer to bypass the usual checking and savings account practice for personal reasons. This has helped bolster the popularity of prepaid credit cards since some issuers allow a cardholder to have their paycheck directly deposited on their card, thus eliminating the need for a bank altogether.
These are just the most common reasons a person would consider a prepaid credit card for their spending needs, but there are countless other reasons why these unique credit products are becoming more popular by the day.
Prepaid Cards vs. Regular Cards – What’s the Difference?
The first and most distinct difference between regular and prepaid cards is the manner in which regular cards are issued; more specifically, a “normal†credit card issuer will pull your credit report for the purpose of determining how much credit can be safely extended to you as well as at what interest rate. Many prepaid credit card companies bypass this step completely since they aren’t extending you any credit at all, so the chances of your credit history impacting your ability to get a prepaid card are lessened significantly.
Perhaps the largest downside of a prepaid credit card is the fact that you might successfully use one for a number of months or years, but your steady and routine use of the card will not be noted with the credit bureaus (depending on the specs of the program you choose). This means that only certain prepaid cards allow for the re-establishment of credit over periods of time, so before you commit to any one program be sure to read the review in its entirety so you can be sure that the program matches your long-term financial goals.
Ready to Apply for a Prepaid Credit Card?
Great! All you need to do is visit our prepaid credit card offers section to pick the card that best fits your needs. Once you have selected the card you like best, simply click the apply button and you’ll be taken to a secure credit card application processing center where you will receive your approval in relatively short order. It’s that easy!
Kimberly Carte
Team Your Credit Network