Prepaid credit cards have increased in popularity and they’ve become a great alternative to credit cards. These types of cards are essentially debit cards, however, they’re not necessarily issued by your personal bank. Anyone can acquire a prepaid credit card, including people with no credit history and bad credit. In fact, it’s not uncommon to find parents getting a prepaid credit card for their teenagers and college students. However, these types of debit cards aren’t only for people who can’t get traditional credit cards.
Prepaid credit cards work like traditional credit cards. They feature either a Visa or MasterCard logo, which lets cardholders use their debit card wherever Visa or MasterCard are accepted. Prepaid credit cards are definitely appealing and many consumers prefer these cards over traditional credit cards. There is no application process, thus no one is ever rejected for a card. Plus, there’s no risk of acquiring massive credit card debt.
If you’re thinking about getting a prepaid credit card for you or your child, it’s important that you understand how they work.
- Purchase a prepaid credit card. You can buy a prepaid credit card from many different retailers. They are frequently sold in gas stations, drug stores and grocery stores. Prepaid credit cards are not gift cards, thus they’re not assigned a particular value. You decide how much you want to load on your prepaid credit card.
- Load money onto your prepaid credit card. After you purchase a prepaid credit card, the retailer will activate your card at the register and load a specific dollar amount. You need to bring cash to the retailer’s store. If you want to load $250 onto your prepaid credit card, give the merchant $250 and he will credit your debit card. Once you deplete the funds on your card, you can return to the merchant and reload your card. Depending on your employer, you can direct deposit your paycheck onto your prepaid credit card. Canceling Your Credit Card and Getting a Prepaid Credit Card
- Use the card for any purchase. You’re not limited in where you can use your prepaid credit card. Because the card features either a Visa or MasterCard logo, you can use the card to book an airline ticket, make a hotel reservation, buy groceries and make other purchases. If you like, use your prepaid credit card to pay bills online.
What to Consider With Prepaid Credit Cards?
Remember, a prepaid credit card is not a traditional credit card. You can only spend what you load onto the card. Additionally, a prepaid credit card will not build or improve your credit score, but it can teach you good money management skills and prepare you for a traditional credit card.
While a prepaid credit card differs from regular credit cards, there are similar features. Many prepaid credit cards offer online account management, in which you can view your account balance and transfer funds from your bank account onto the card. What’s more, prepaid credit cards offer protection if the card is lost or stolen, wherein the issuer will credit funds back to your account or issue a replacement card.