All About Prepaid Credit Cards

For many people who have a bad credit history or no credit history, obtaining a credit card can be very difficult, or they may have to settle for a card with a very low credit limit. This can be a big problem, even for those who do not intend to buy things with a credit card since one is often needed in order to make a reservation for a car rental, or perhaps for a hotel room or an airline flight. One solution is pre paid credit cards with which you pay money up front and are issued a prepaid card that can be used anywhere a regular credit card is accepted. It is very much like the debit card you get when you open a checking account.

The benefits of prepaid credit cards

Because you have paid into the account beforehand, it is harder to get into trouble with debt than with a regular one. In addition, there are no interest charges or monthly bills to play. The caveat with both of these pluses is that some prepaid cards allow an overdraft; be sure what the policy is with yours. One more advantage is that as with regular cards, you can get your money back more easily if there is a problem with a purchase, as compared to when you pay cash.

The downside:

You have to pay a fee when you open the account, which usually amounts to from five to ten dollars, and you have to pay another fee each time you put more money in the account. If you look at a prepaid card contract, you will find it is very convoluted and in the fine print, there may be numerous hidden fees. Debit cards are much better in this respect.

Prepaid credit cards should be considered only for situations where a debit card is not accepted and you are carrying a big balance on a regular credit card.

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