Prepaid Credit Cards - How They Work

Prepaid cards were designed for individuals with no or little credit history. This is also a good alternative to a checking account.

This is how prepaid credit cards work; first you deposit funds into your account/card. You use your card to pay bills or make purchases. Then the funds are taken 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.

You can also use you card at ATM's to access cash. You will never have to pay interest or overdraft fees with a prepaid credit card.

Many cards also offer another feature called credit builder. This feature will record your payments made through bill pay. It then reports them to a credit reporting agency. This can be used to show future lenders your credit worthiness.

These cards will be issued as a visa or mastercard. This means your card will be accepted everywhere the visa or mastercard logo is displayed. You can also use your card online and over the phone. You card will not say prepaid on it so no one will ever no the difference between your card and an unsecured credit card or bank card.

The best part about a prepaid credit card is it doesn't matter if you have bad credit, little credit or no credit. They guarantee approval for everyone. There is no credit check or chexsystems verification.

In sum, prepaid credit cards are safer than carrying cash. They can be used like any credit card. If you don't have a bank account they are a great alternative and everyone is approved.