When we say to ‘plastic’ cards, we are referring to the vast variety of cards issued by credit card companies. Basically, these cards have value and they work like money. But obtaining one regular credit card is not always easy and don’t guarantee an instant approved credit card. Companies issuing these cards have already learned their lesson. They don’t want stacks of defaults cases and that is why they run credit checks through credit reports. This is a big thing for people with bad credit history and for people with no credit history. Most of the times, these people do not get approved of their credit or loan application, thus classifying them as high-risk consumer.
Luckily Prepaid Credit Cards and Secured Credit Cards came into existence. These cards differ with each other though both function as good credit builders if reported to the credit bureaus.
Prepaid Credit Cards are reloadable ‘plastics’. Consumers put money in them and use the cards to purchase items. They work like regular credit cards except that there is money already in the cards. But since they are not money lent by anyone, application for prepaid cards will not be placed in the credit report. Even if they deposited a good sum in the card, this doesn’t mean that this will be honored in the credit report. But certain prepaid cards are available with that feature. Account Now Prepaid Visa Master card has a Credit Builder feature. Consumers can pay their bills online and the company will report the payments to a national credit reporting agency, the PRBC.
The best way to build the credit history for no credit history consumer is through the use of secured credit cards. These credit cards require a security deposit that would be used as a back-up payment in case the consumer defaults on a payment. The deposit will be applied to the credit and would still consider the person as “paid” if the amount of the deposit is sufficient to cover the entire credit. Some secured credit cards require a consumer to have a savings or checking account in the same credit card company. People may be turned down by this type of cards even when these people say they are willing to pay the deposit.
Consumers can always just abandon the use of credit cards and prepaid cards if they don’t want to be bothered with the credit history issues. Many people think it is the best way to not get themselves involved in money burdens. But that depends entirely on certain circumstances; not wanting a credit card is just one of them.