Some people call prepaid credit cards, along with secured plastics, fake credit cards. These types of cards actually do not provide credit. They just allow you to use your money you have deposited. But is it a ground for regular credit card holders to consider prepaid credit owners odd men out?
The statistics shows that about 50 million US citizens are unable to get approved for a credit card. Most of them are young people with no credit history, or those with a blemished credit report. And prepaid or secured credit cards are nearly the only opportunity for them to establish or rebuild a credit history.
To qualify even for a bad credit card offer you are to meet a number of credit card issuer’s requirements. Getting a prepaid credit card you will not have to worry that you will be rejected. Prepaid cards are available for all people who have reached 18, without providing a bank account or a credit report. All you need to have with you is your valid ID and the amount of money you want to deposit. Most major credit card brands issue prepaid cards. And most retailers accept them.
The Merits of Prepaid Credit Cards
Probably, the merits of this type of cards can, probably, be estimated at their true worth only by people with bad or no credit history.
The first conspicuous advantage I can point out is that owing a prepaid credit card you do not have to carry those rolls of cash with you. You can enjoy the pleasures of having a credit card.
Then, such a card allows you to build or slowly reestablish your credit history.
Prepaid card offers work just like regular credit cards. You can make all types of purchases with them, make hotel, restaurant, airline ticket reservations, and buy items online with these cards.
Moreover, some prepaid cards, like those issued by Visa, for instance, come with rewards programs. So, you can enjoy not just the conveniences and security of credit card use, but you can feel like an actual reward credit card holder.
Prepaid cards are accepted all over the world.
Such offers give you a chance to acquire a reputation of a diligent and reliable customer in the eyes of credit card issuers. They have an opportunity to monitor your credit behavior, which is reported to credit bureaus. If you prove yourself to be a creditworthy and reasonable card holder, the issuer will consider you as a potential credit consumer.
The Shortcomings of Prepaid Credit Cards
The main disadvantage is that you cannot get a credit. Your prepaid card enables you to spend only the money you have deposited beforehand.
Another inconvenience is keeping track of your card balance. It will be a bit more complicated than it is with your regular credit card. Not all the merchant terminals can give you the information on your remaining balance. You will need to contact your issuing bank or go on their web site to pick up this info.
As for reloading your prepaid card, this might also be inconvenient to some extent. If you choose cash to reload your balance, you will have to go to the participating outlet where you have purchased your card. Reloading online, however, will not cause any troubles.
And, of course, the charges. An application fee, a service charge, the transaction fees, reloading charges, and some other fees â€“ all of them are applied to your prepaid credit card. But, actually, this could hardly be called a shortcoming of prepaid cards. It is more a necessary evil associated with all types of credit cards. This lets you “enjoy the pleasures” of paying fees, just like a regular credit card holder.
So, now that you see the positive and negative aspects of owing a prepaid credit card, would you it a black sheep? Or maybe, you’d better call it a black swan?..