What is a Prepaid Credit Card?

In the last few years prepaid credit cards have been very popular on the market; however some residents are still misunderstanding what they are really about. We are going to look at what these cards are and how they can work for you.

A prepaid card is like a debit card with different benefits. A debit card uses the money you have in your current account without fees. At a store you can use a debit card like a credit card transaction to sign for the purchase rather than using a pin. You normally have an automatic debit card when you open a current account. The debit card is attached to the bank account and is reported with the overall current account reporting. This means the amount of time you have had the account open and your usual balance. The debit portion is not reported.

With prepaid credit cards the company is going to report the account like a credit card rather than a bank account. This means that you get points for having the card open. Since you can use the card as a credit card you gain more favourable scores with the reports.

The difference between these cards and regular credit cards are the fees. With a prepaid card you are charged to open the card, for a transaction fee, and a reload fee. Sometimes there is also a monthly or yearly fee for having the card. You are going to set the limit on the card. If there is no money in the account you can’t use the credit card. This of course is different than the regular card because it has a limit that the company controls and you pay the amount back as you go. This is why it is more like a debit card.

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This entry was posted on Thursday, August 21st, 2008 at 7:39 am and is filed under Types of Credit Cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.