The only difference between prepaid and traditional credit cards is that prepaid credit card accounts are paid into by the cardholder first. For this reason, prepaid credit cards actually have more in common with debit cards. After the card is used, the cardholder can pay back into the account to bring the “open credit” back to its initial balance. Prepaid credit cards to build credit are the most popular types of these cards.
It’s easy to mix up prepaid and secured credit cards, but there is one key difference between these different types of cards. In the case of prepaid cards, the cardholder pays directly into the credit account before being able to use the card. With secured cards, money is actually paid into a separate account that the issuing bank holds as collateral. In both cases, the money is refunded to the cardholder once they close the account or graduate to a traditional credit card.
There are a few advantages to getting a card that is prepaid. The first is that in many instances, a person can use prepaid credit cards to build credit. This is great for individuals with no or poor credit history, as it gives them a chance to develop their finances and establish good credit. Another advantage to using this kind of card is that there are no worries about overdraft charges or going over one’s credit limit. On the same note, a person also can’t go into debt when using these cards. All of these advantages can teach first-time credit card users to keep track of their spending and limit purchases.
Another advantage of using prepaid credit cards is that the customer has the ability to spend where only credit cards are accepted. For obvious reasons, online retailers can’t accept cash payments and require a credit card. Without the option of prepaid cards, individuals with bad credit or no credit wouldn’t be able to shop using online retailers or in other places that only accept cards. This can actually be a major hindrance because credit cards are so thoroughly ingrained into our society. All movie rental kiosks and the majority of new vending machines are built to only accept credit cards. Paying for gas is also much easier when a credit card is handy since it saves a trip inside the store. These kinds of cards open up all of these luxuries to individuals who otherwise might not be able to enjoy them.
When applying for one of these cards, applicants are asked to provide their name, address, contact information, and social security number. In most cases, a credit check is not even used during the application process. Some cards feature a one-time signup fee. Beyond this, all an applicant needs to do is choose either a pay-as-you-go plan where the card is reloaded when the holder wants to or a monthly plan where a regular payment is made.
Not all prepaid credit cards report to credit bureaus though, which defeats the purpose of obtaining one if the cardholder’s goal is to use this kind of card to build credit. Among the top cards that build credit are the Visa Black Diamond RushCard and the READY debit Card. These cards, as well as, the Baby Phat RushCard, offer favorable terms and conditions. They also meet the most important criteria, which is that they are prepaid cards that can build credit. With any of these cards, a person can build good credit, as long as they are responsible.