Prepaid Credit Cards - How They Work

By Dan Moskel

A prepaid credit card is perfect for individuals than have little or no credit history. It is also a great alternative to a bank 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 by a variety of methods including money gram, western union, and direct deposit. Using direct deposit you can save hundreds of dollars on check cashing fees. It is free to sign up and use direct deposit.

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.

If you need cash prepaid cards can be used at ATM's. With a prepaid credit card you will never have to pay interest rates or overdraft fees again.

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.

Prepaid credit cards are also issued with a mastercard or visa logo. So you can use your card to make purchases everywhere a visa or mastercard is accepted, including online and over the phone. Your card will not say it is a prepaid credit card and will look just like any visa or mastercard.

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, these cards are much safer than carrying cash and are used just like any credit card. They also can function just like a checking account and approve everyone.

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