How Do Prepaid Credit Cards Work?

Prepaid Credit Card

Credit cards are a part of daily life these days. Having established credit is very important for many reasons from getting financed to getting a job. Prepaid credit cards are a way for someone who can not get a traditional credit card to build credit. There are some pros and cons to prepaid credit cards, so shopping around and being informed is important when getting one. A prepaid credit card will help build credit without the risk of falling into debt and hurting credit even further.

A prepaid credit card is basically like any other credit card. It is backed by one of the major credit card companies. Prepaid credit cards, though, are completely controlled by the user. The account for the card is opened with a deposit that is then the credit limit. Whenever the user desires more money can be added. Only the amount of money that is in the account can be spent. If the user tries to spend more than their limit the card will be denied. Prepaid credit cards can be a great option for someone looking to build credit.

The advantages to a prepaid credit card differ somewhat from those of a traditional credit card. In some sense a prepaid credit card offers more advantages. As mentioned, there is no way that a user can go into debt using a prepaid credit card because the balance is limited by how much is deposited into the credit account. The card also carries no interest charges. They can be used wherever a traditional card is used. Prepaid credit cards can also help build credit because some companies report the payments made to the credit bureaus. Prepaid credit cards offer the convenience of a credit card without the worry.

There are some things to consider about prepaid credit cards. There are fees for loading and, sometimes, not loading a prepaid card. There may be limits for how much money you can put on the card, as well as limits on how much needs to stay on the card. Prepaid cards vary in the fees charged and other features. Also some cards do not get reported to the credit bureau, so if building credit is the goal then it is important to look for a card that reports to the credit bureaus. Shopping around and comparing different cards will help you find the best card deal.

Getting a prepaid credit card is not difficult. There are many online sources for finding these cards or the major credit card companies all offer their own prepaid card. The application is simple with no credit or employment check. There is usually a small set up fee and then the deposit. Once you receive your card you can then begin using it.

Prepaid credit cards offer people a way to have a credit card when they can not qualify for a traditional credit card. They offer many benefits to keep a person from further hurting their credit record. There are a variety of prepaid credit cards, so comparing different cards before choosing one is a good idea. Prepaid credit cards are a great way to use credit without getting buried in debt.

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Prepaid Credit card

What is a Prepaid Credit Card?

Prepaid Credit Card

I've long advocated cash as the perfect solution to people who can't keep themselves to a budget. It's simple, you take $100 a week or whatever out and that is your spending money. You spend it on whatever you like but when it's gone it's gone. This system works wonders for people who lack the self control needed to stick religiously to a budget. You simply remove all plastic from the equation and there is no way they can overspend.

Prepaid credit cards provide the same benefit, but without the hassle of having to carry all those papers and coins around. basically the theory works like this. You put money on your card, and you use it as you would use a normal credit card. But instead of each transaction increasing the amount you have to pay at the end of the month, you are decreasing the positive balance you have on the card. When it reaches 0 you can't use it anymore. In other words it's impossible to get into debt with a prepaid credit card just as it is impossible to get into debt when you use cash to stick to a budget.

If you've ever used a prepaid phonecard the idea is basically the same. You put a set amount of cash on the card, you use it however you want to and once your balance reaches $0 you either top it up or stop using it. When incorporated into a sound budget plan the card gets topped up again at each payday, and never in between.

The one major benefit that a prepaid credit card gives over cash is that you can get a monthly break down of where your money has gone. If you are in financial trouble, analyzing your spending is a critical part of getting everything back on track. Hopefully you have already worked out how much 'spending' money you can afford and this is the amount that is put on your prepaid credit card each pay day. But you can further analyze where your spending money goes by looking over your account. most people find a few things the first few months that they are spending more money on that they ever realized. When you limit the supply of money - such as by using only a set amount of cash or a prepaid credit card - then the value of each dollar seems to be more. I have actually personally seen two people give up smoking when it was spelled out to them by this method just how much money they were literally burning every month.

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Prepaid Credit Card