subject: Prepaid Credit Cards: Should You Get One? [print this page] Prepaid credit cards are growing in popularity today since they are technically much easier to avail than regular credit cards. However, unlike a regular credit card, a prepaid card does not give its holder the privilege to make advanced purchases that are payable at a later time. And since the cardholder is not provided with a credit line, issuers of prepaid cards are more lenient in approving applicants. In fact, anyone can easily get a prepaid one without worrying about the status of his/her credit history.
Who Should Get A Prepaid Credit Card?
Who are the best candidates for owning a this type of card? There are lots of prepaid card issuers that provide credit reporting services to major credit bureaus nowadays. Hence, prepaid cards can now be used as tools for establishing credit history or for repairing bad credit history. Despite the limitations, not having a credit limit can actually help the cardholder exercise control over his/her spending and avoid debt accumulation.
Parents who want to provide their kids with a credit card can also opt to get a prepaid credit card. For parents who have college kids staying at boarding schools, prepaid credit cards are wonderful tools for sending and receiving cash.
Individuals who are frequently on trips can also find prepaid credit cards beneficial. Prepaid cards with VISA or MasterCard logos are accepted in a lot of merchants and establishments worldwide so instead of carrying a big amount of cash for spending, a traveler can simply carry a prepaid card as a safer mode of payment.
How to Get A Prepaid Credit Card
As we have mentioned at the beginning of this article, individuals with poor credit rating who may not qualify for a standard credit card can start rebuilding credit using a prepaid account. In order to start using this type of card for payment, you will simply need to submit the minimum required amount of cash deposit.
Generally, providers of this type of cards require at least $200 of cash deposit while some will ask for a minimum of $500 or more. The value of security deposit submitted will also determine the borrowing limit of the prepaid account owner. In some instances, the bank may extend a slightly higher or lower limit than the amount deposited. It is important to understand that without an existing balance in the cardholder's deposit account, the prepaid card cannot be used for transactions.
Prepaid credit cards do not charge interest rate fees since purchases are instantly paid off using the available cash in the cardholder's account. However, consumers need to be aware of other fees associated with prepaid credit cards. Set up fee, maintenance fee, transaction charges and penalty fees are just some examples of fees you have to pay when you have a prepaid card.
The specific costs will depend on the issuer so it is important to check out the exact Terms and Conditions before acquiring a prepaid card. Also, not all prepaid credit cards report to the bureaus so be sure that your chosen prepaid card offers this provision before getting one.
