Credit Card Review Blog

The Pros (and Cons) of Prepaid Credit Cards

The Pros (and Cons) of Prepaid Credit Cards

Prepaid credit cards are becoming increasingly popular. Many people are turning to prepaid credit cards instead of using traditional debit cards. Let’s take a closer look into the world of prepaid credit cards.

The Pros
Prepaid credit cards allow the cardholder to take control of his or her credit account. Each prepaid credit card comes with the added feature of allowing the cardholder to load the desired credit limit onto the card. Here’s how it works. Money can be transferred onto the credit card as often as desired. Once the money has been spent, the credit card is no longer usable until more money is transferred into the account. Thus, prepaid credit cards work similar to the way debit cards work.

You don’t have to have your credit checked in order to sign up for a prepaid credit card. Therefore, prepaid credit cards are perfect for teenagers, college students, or even established adults. Often times, the cardholder can get the activation fee and/or weekly fee waived when they sign up for Direct Deposit.

Prepaid credit cards are great, especially if you make online purchases often. There is no limit to the amount of purchase transactions you are allowed to make. Prepaid credit cards are also an easy way to pay utility bills, mortgage bills or other bills. You can also easily receive free text messages and emails alerting you to the status of your account.

More and more parents are choosing to sign up for prepaid credit cards for their teenagers because these credit cards are very controlled and there is a low-risk associated with them. Using a prepaid credit card teaches proper credit card habits and responsibility as well.

The Cons
Prepaid credit cards really don’t have very many cons. In fact, there is mainly one con associated with prepaid credit cards. This is the fact that prepaid credit cards don’t really help out your credit score or credit history (however, they don’t really hurt your credit history either). The status of a prepaid credit card account isn’t reported to the major credit bureaus. All in all, a prepaid credit card is a glorified debit card with a few more perks and incentives.

When it comes down to it, it is beneficial to use a prepaid credit card. You have access to more features with a prepaid credit card than you do with a traditional debit card. The only drawback to using a prepaid credit card is the fact that it doesn’t really boost your credit score or credit history. However, it does teach proper credit card use and instills responsibility into the cardholder.