Debt Management Info Blog

posted by on Oct 25

You pay for the credit card before using it, this is why it is called a prepaid or secured credit card.The bank of the credit card issuer must receive a “security deposit” of a certain amount from the credit card applicant to pay for the prepaid card.The credit line on the credit card will be limited by the security deposit amount, normally between $200 to $500, which has been prepaid for the use of the card.

With traditional credit cards, you apply for credit and receive approval or you are denied based on your credit rating, then if approved, you are issued a credit card with a specified line of credit.If you do not have credit established or if you have damaged credit the traditional banks will probably deny you access to a line of credit.

The closely enforced credit rating requirements that most traditional lenders go by may be eliminated on prepaid credit cards as sometimes they may not even do a credit check or verify your employment.Since your line of credit is secured by the deposited security amount, the credit card issuer is covered in case you default on the payments.The prepaid credit card is a good way to establish credit or rebuild poor credit and nearly everyone is eligible because these cards are guaranteed for payment by the prepaid credit card deposit.There may be age restrictions (18 or 21) on these prepaid credit cards or you may have to be a U.S. citizen, but these instant credit approval cards have a high approval rate because the restrictions are minimal.

Every place you can use traditional credit cards such as Visa and MasterCard, your prepaid credit cards will be welcome.You can use prepaid credit cards online and offline, you can pay bills online and over the phone, and you can withdraw cash from ATM machines with them.

Prepaid credit cards offer can offer such advantages as allowing you to rebuilding credit or establishing credit for the first time and they can help you avoid making late payments.Other advantages to the prepaid credit cards are that your check can be directly deposited onto your card and it may also eliminate the need to write money orders and checks and go to the post office.

Some things that are disadvantages of the prepaid credit card are higher interest rates and over the limit fees, and a monthly maintenance fee.Other disadvantages of prepaid credit cards are the necessity of paying security deposits which must be put down before you can use the card and the reality that these cards sometimes will not be accepted by car rental agencies.

It doesn’t matter whether you are establishing credit or rebuilding your credit rating, you must be on time with your payments and make sure you do not go over your credit limits.Helping you to control your regular spending habits and to track how your finances are affected is the original reason prepaid credit cards were developed.

If for some reason we allow our payments to fall behind for a couple of months, we can easily be caught in a never ending cycle of late payment fees and they can really add up very fast.By continuing to make a consistent effort to pay your payments on time, most companies may return your deposit with interest andor increase your credit line.