Prepaid Credit Cards
Student prepaid credit cards and more
If you have bad credit or no credit, you may have been denied a credit card. Unfortunately, building or rebuilding credit can require the use of a credit card, so you may stay at the same credit rating for years without one. Prepaid credit cards allow you to pay a set amount on a card to establish or rebuild your credit. This is a great option for students as well as for people with a less-than-perfect credit score.
How Prepaid Credit Cards Work
Prepaid credit cards are funded by the cardholder instead of by the bank. While a regular credit card borrows against the bank or credit institution's money, which is then paid back with interest, a prepaid credit card is loaded with a set amount of money provided by the cardholder. Because the card user is not technically borrowing the money, no interest is charged and no penalties are incurred. Prepaid credit often comes with rewards or other benefits, too, but users should beware of hidden fees. Many prepaid credit cards will charge you an activation fee or a monthly fee to use them, as well as withdrawal fees for taking out money against the card. Be sure you know what you're getting into when considering prepaid credit.
Types of Prepaid Credit Cards
Like secured credit cards, prepaid cards work by placing your own money onto the card. This teaches responsibility and good credit habits because once the money has run out, the credit card is maxed out and more money must be put onto the card. This makes it a great first-time card for new consumers with no credit. Some types of prepaid credit cards include:
- Student prepaid credit cards. A student prepaid card allows parents or students to place money on the card and use it for education-related expenses or items such as groceries or entertainment. It's a good first-time card for students to teach and build good credit habits.
- Prepaid credit cards for children. Like a gift card issued by a major retailer, a prepaid card for kids is controlled by the parent and can be used at any store. Parents apply for the card in their child's name and then the child or the parent can deposit money onto the card.
- Anonymous prepaid credit cards. These work like gift cards. You don't have to submit your name or personal information in order to apply for and use one, and they may or not be reloadable.
- Free prepaid credit cards. These cards come from retail stores and guarantee approval. You can also reload the card at these stores if you wish.
You can choose from prepaid VISA credit cards, prepaid MasterCards or prepaid cards from other main credit companies. Choose the card that's right for you, load it with what you can afford to spend and start building or rebuilding your credit today.