What Are Prepaid Credit Cards?

By Steven J. Talrechi

Credit can be a touchy subject for many individuals. Often it can be quite difficult to be approved for a traditional credit card. Perhaps you have had a poor credit history in the past, or perhaps your problem is that you just haven't had any credit history yet. Whatever your circumstances are it can feel downright degrading to get rejected for a credit card. However, there is a way that you can start building your credit rating and give you the flexibility that a credit card affords you, and that is by getting yourself a prepaid credit card.

So, what exactly is a prepaid credit card? Well, it's basically an account that can be reloaded that is accepted any place that you might use a traditional credit card. The individual card holder will deposit money into their account before making any purchases. If you have money in your account then you are free to spend with your prepaid card. Like a traditional charge card your prepaid card will have a spending limit set which is determined by how much you have deposited into your account, and how often you are able to deposit money.

There are a number of benefits to having a prepaid credit card. You'll have the same freedom that you would with any credit card. Your prepaid card can be used anywhere that credit cards of any kind are accepted.

A prepaid credit card is also a very useful tool for you to control your spending. By only purchasing items when you have already dedicated money for them you are ensuring that you are not going to fall down the slippery slope to major credit debt. With your prepaid credit card you will learn how to handle your finances effectively. That education will be something that you can take with you through the years.

A prepaid credit card also has the advantage of being protected from identity theft. If you are buying online or by phone, you can have the peace of mind that comes from knowing that your other accounts are insulated from this card.

So how to you set up a prepaid credit card. Well you will incur a fee to set up your credit account. Typically it is quite small. Anywhere from $5-$10. Additionally, there are usually fees that accompany any deposit that you are making into your account. Though there are some slight fees for those who have been struggling with their credit or merely want to keep a tight handle on their spending it really might be a viable solution for you.

There's no escaping it; our society runs on credit. You need a credit card to do just about anything these days. You need a credit card just to function these days. If you are working with bad credit, an insufficient credit history or just trying to manage your spending, then a prepaid credit card may be the answer for you.

About the Author:

Steven J. Talrechi is an expert on credit reporting for more than 10 years. He authors various topics on said field, including applying for a credit card, and different credit card offers.