All About Prepaid Credit Cards

Prepaid credit cards are slowly becoming more popular as credit gets tighter and many begin to suffer from large debts.  The prepaid credit cards act more like a debit card from your current account than a credit card.  They can help in a few ways when you are suffering from too much debt.  First if you have suffered from a poor credit rating because of late payments on bills, missed payments, or county court judgements sometimes the only option is the prepaid credit card.  You are seen as a risk by the credit card companies so they may not offer an open line of credit.  The factors that have you in poor credit rating can be changed by prepaid credit cards.

A prepaid credit card looks and acts like a regular credit card with one major difference.  You are going to be placing a specific amount of money on the card like a debit card or a mobile phone card.  You have the line of credit you want on the card and you can use the card any where you would a normal credit card.  As you use the card the balance will lower.  Once you reach the end of the balance you have on the card you will need to recharge it.  You can only spend what is on the card.  Most will allow 5,000 pounds to be the maximum transfer.  You get to spend the money because you have the money on the card.  If you don’t have money to place on the card or you use it then the ride is over.  It is a great way to regulate spending for some individuals.  They can be given to children as well as employees, and it is a great way to travel.

There are charges for the card even though there is not interest charge like regular cards.  The issuer has a processing fee.  They may also charge for withdrawing money at an ATM or a reload fee when you need to add money to the account.  The reason they have fees is because there is no interest charge.  They need to make a profit and this is how they can do so.

Poor credit usually means you struggle to get a credit line on a credit card or one that is attractive.  The prepaid cards are only one of your options, but often the best for most individuals because of the regulation to spending it gives you.  Other options are secured credit cards.  In this case you have a card in which you pay a deposit to the issuer.  As long as you make repayments you will get the deposit back.  The interest rate is higher as are the repayment minimums.  These cards are an option if you have poor credit with arrears, defaults, CCJ’s, and even discharged bankruptcies.  If you manage the card properly you can repair your credit.  However you do need the security deposit, which most individuals don’t have, which makes the prepaid cards easier to obtain.