A Prepaid Credit Card – The Safe Choice
A prepaid credit card is rapidly becoming a popular alternative to individuals with bad credit or no credit. It enables you to have all the privileges of a standard credit card without being shut down by tough credit qualifications.
When applying for one, you will in essence deposit your own money into your card account, and will have access to that balance only. Most prepaid credit cards will be prepaid Visa and MasterCard – because they have divisions specializing in this type of card account.
As you’ve probably gathered, this is really not exactly a credit card at all. Yeah it’s plastic, and yeah it looks like a credit card, and yes it even works like one. However, it does not involve the extension of credit at all. So the correct term is actually Prepaid Debit Card because it debits your available personal funds that you yourself have deposited into your card account.
Yet & still, the term Prepaid Credit Card is still the more widely used term, largely because of that Glowing and Prestigious Visa or MasterCard credit logo associated with it. Therefore, for the duration of this discussion we will continue to use the popular associated term of “Prepaid Credit Card” but at least now you know the scoop.
Choosing a Good Prepaid Credit Card
There are a fair amount of these type of prepaid cash cards surfacing on the market today. But only a handful really stand out as far as quality goes. Below are things you need to consider in order to make the best informed decision.
Cost & Fees: Some prepaid card issuers charge ridiculous fees. We’re talking annual fees, application fees, groundhog day fees whatever they can think of! It’s understandable that any type of card account will come along with some charges, but some of these companies are just trying to nail you. First of all, a prepaid credit card should not contain any type of interest or finance charges at all because remember: They are not extending you credit – YOU are depositing and using your own money.
Avoid prepaid cards with an annual fee, this is unnecessary. Why do that when you can easily get a Prepaid Card with No Annual Fee.
Application fee: Some money hungry idiots will charge you up to $150 or more and disguise it as an application fee. Please! There not that much application in the world…at least not for something like this. Heck if you can pay $150 for a credit card which is really a debit card, then you might as well apply for a secured credit card.
A more reasonable application fee for a prepaid card is $10 – $30 bucks if at all, depending on all the benefits provided. Some reputable card companies of this kind do charge more like close to $60 — but oftentimes that’s because they’re supplying you with additional benefits such as a credit builder feature or other.
It would be a plus if you get a card that includes a credit builder feature. There are several prepaid cards that can build your credit even though they’re not extending you credit. Basically what they do is report your bill paying habits and frequency to consumer credit reporting agencies.
All of these cards usually include a monthly fee associated with account maintenance. This is standard and will normally range between $4 – $7 bucks a month. That’s pretty standard. There are some that charge slightly higher monthly fees but we wouldn’t recommend them, at least not as your first choice.
In closing, a Prepaid Credit Card / Prepaid Debit Card is a good option for you, especially when you have bad credit. It will provide with the convenience and privileges of a standard credit card. You can use it for bill pay, better management of spending, online shopping, conducting business by phone, and a few even provide Free Direct Deposit!
Another great benefit is that it is Much safer than carrying cash. Many of these card accounts are now FDIC-Insured (backed by the Federal Deposit Insurance Corporation up to $250,000). Look for the FDIC logo. This insures your money is SAFE and will be reimbursed if your card is ever lost or stolen.