Introducing Prepaid Credit Cards

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.You are required, as a rule, to pay from $200 to $500 as a security deposit and the credit limit on your card will be in line with the prepaid deposit.

Any traditional credit cards will have a specific line of credit assigned to it and approval for the card will be granted based on your credit rating.Traditional banks usually will deny the use of a credit card or line of credit to those who have a damaged credit rating or no 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.This is a simple way for people to rebuild their credit or establish a credit rating for the first time, and because these cards are secured by your deposit, almost anyone is eligible to receive one.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.

You can conveniently use prepaid credit cards like traditional cards, where ever MasterCard or Visa is accepted.These prepaid credit cards can be used to pay bills online and over the phone and to withdraw cash from an ATM, and you can also use them to make purchases online or offline.

Advantages like the re-establishment of a good credit rating or building up credit where it did not exist before and the avoidance of late payments can come from the use of prepaid credit cards.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.

Their higher interest rates, higher fees for an over the limit balance and a monthly maintenance fee are a few of the disadvantages of the prepaid credit cards.Some of the disadvantages of using the prepaid credit card may be the possible inability to rent a car at most car rental agencies and that security deposit that has to be paid before using the card.

It is of utmost importance for you to be on time with your payments and you must not go past the preset credit limits on your credit card agreement when you are trying to establish or rebuild your credit.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.

It is easy to allow ourselves become involved in the late payment cycle and before we realize it, we are two or three months behind and the fees keep getting higher and higher.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.