How to Use Prepaid Credit Cards

How to Use Pre-Paid Credit Cards

A prepaid credit card is not the same as a more traditional credit card. There are details that you need to be aware of such as how to setup, what a prepaid card can be used for, how to use it, and much more. Just like anything else to do with your finances, it is better to get some basic information before you make a final decision.

Here are a few tips that will show you how to use a prepaid credit card:

Setting up a prepaid credit card is simple. You will deposit money into your credit card. However much you deposit will establish your spending limit at that time. If you think about it, a prepaid credit card is more or less a debit card that is not attached to a particular bank account. Instead, you load it with the proper amount of money and when it is gone it is gone. Of course, you don’t have to get rid of your prepaid credit card after the balance hits zero. You can always add more money so you can continue to use it.

Fees do exist. Some people forget that setting up a prepaid credit card can cost a little bit of money. To start, there will be a setup fee which usually does not exceed $10. Find out what the set up fees will be before you begin to setup your card.

But how do I use a prepaid credit card? This is something that many people find themselves asking. Generally speaking, you don’t have to do anything special to use one of these cards. It is used just like a regular credit card. You can use a prepaid card for any kind of useful purchase, such as everything from daily purchases to reserving hotel rooms and rental cars.

Bad credit does not matter. Some people never attempt to setup a prepaid credit card because they feel that their bad credit will hold them back. This is not the case because you are putting money on the card as opposed to relying on credit from the credit card company. This means that you are essentially using your own money. For this reason, your credit score has no bearing on your ability to get started.

No finance charges and no bills. You are using your own money and when it is gone you don’t have the ability to charge anymore. This means that you never have to worry about carrying a balance and getting hit with a finance charge, which can be up to 19% in some cases. Additionally, monthly statements are not sent out for prepaid credit cards; there is no reason for them. Though some prepaid cards will offer this service along with other helpful credit card services.

If you need to use a prepaid card due to a bad credit history, then it is possible to gradually build up a credit history with a prepaid card. You need to read the terms and conditions of the card you wish to sign up for in order to clarify the specific financial institutions conditions and terms for such a possibility in the future. If you have a $1000 spending limit on the card the lending institution will gradually increase your ability to increase the limit.

If you are a parent and would like for your child to have the security of a credit card at college then a prepaid credit card is a good option. You can then have some control over how much money the child is spending and can increase the spending limit or decrease the spending limit depending on how much you put into the card.

Now that you know how to use a prepaid credit card you should ask yourself this question: would this be in my best financial interest?  Here is a selection of some of the best prepaid credit card offers.