Is a Prepaid Card the Answer?
If you have a low credit score you may find that you have a tough time getting approved for a credit card. You may also find that you miss out on a lot of convenience when shopping or paying bills, so you may be willing to do just about anything to get your hands on a credit card with your own name on it.
Enter prepaid credit cards.
Unlike secure credit cards where your available credit is matched to an amount held as collateral in a bank account, a prepaid card has an available balance that is directly connected to an amount you load onto the card. If you purchase the card and load $250, you will have $250 available to spend with the card minus any fees.
Be prepared: Prepaid cards usually feature a wide variety of fees from purchase fees to fees for balance inquiries. In fact, some prepaid credit cards are accompanied by so many fees that some cardholders find their balances depleted much quicker than they realized. For this reason, always be sure to read and understand the terms and conditions of a prepaid card before making your decision to purchase one.
When are prepaid credit cards a good idea? People who simply cannot get approved for a traditional credit card may use these cards for the sake of convenience until they can build up their credit score enough to qualify for an approval. These cards also make great gifts and are used by many parents as a budget learning tool for their teenagers.
Although prepaid credit cards feature the logo of a major credit card, they may not function exactly as a credit card does. For example, most gas stations will not allow for prepaid credit cards to be used for the Pay at the Pump feature, and oftentimes these cards will not work if you try to schedule recurring payments. For this reason, if you are looking for the highest convenience while making purchases and payments a traditional credit card will be much more attractive. On the other hand, if you can’t get a regular credit card then a prepaid card may be the temporary answer.
June 9th, 2008 at 7:22 pm
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