Prepaid Credit Cards - How They Work
Written by Dan Moskel on October 14th, 2008Prepaid cards were designed for individuals with no or little credit history. This is also a good alternative to a checking account.
This is how they work; you deposit funds into your account/card. Then you make purchases using your card. The funds are withdrawn from your account to pay for the purchases.
You can deposit funds using direct deposit, money gram, western union and a variety of other methods. Most cards offer free direct deposit and this will save you a lot of money by not having to pay for check cashing fees.
Most cards offer an additional feature that allows you to use your account just like a checking account. You can write physical checks to companies or individuals. This can be used to pay bills such as car insurance, cable or rent. This will save you money because you will no longer have the need to pay for money orders.
Prepaid credit cards can also be used at ATM’s to access cash. With this card you will never pay interest or overdraft fees again.
It is common for prepaid cards to come with another free service called credit builder. Credit builder will keep a record of your bills paid through bill pay and will report these payments to a credit reporting agency. This can be used to show credit worthiness to future lenders.
Prepaid credit cards are also issued with a mastercard or visa logo. So you can use your card to make purchases everywhere a visa or mastercard is accepted, including online and over the phone. Your card will not say it is a prepaid credit card and will look just like any visa or mastercard.
Prepaid cards do not have a credit check or chexsystems verification. This means everyone is approved regardless of their credit history.
In sum, these cards are much safer than carrying cash and are used just like any credit card. They also can function just like a checking account and approve everyone.
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Tags: Credit Cards
