Prepaid Cards - Prepaid Debit Cards
Prepaid and debit cards offer the convenience of a card without the hurdle of a credit check. Because money is debited directly from your account, these cards do not report to the major credit reporting agencies. The prepaid debit cards are not credit cards. Want to learn more about prepaid cards? Get helpful tips & advice from our experts.
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The Benefits of Prepaid Debit Cards
One of the newest and most successful financial products is the prepaid debit card. Millions of people have purchased these products for personal use, and their uses include payroll and allowance. There are dozens of prepaid cards on the market, all with different features and fee structures.
They all, however, have a few things in common. First, you don't need good credit to get one. You simply load money onto the card and then spend that money in much the same way as you would with a credit card or debit card linked to a bank account. Second, prepaid debit cards do not help users build credit since no one is lending you any money. So if you're looking for a tool to help you build your credit, this will not do the job. (Check out secured cards for that.) Back to top.
Who Should Consider Prepaid Debit Cards?
Prepaid cards are particularly appealing to people who can't get a bank account. The underbanked -- as they are often called -- often load their paychecks onto their prepaid cards and then use the cards as they would a bank debit card. Other people who may find prepaid cards appealing are those who frequently get hit with credit card fees for going over their credit limit or paying late. If you tend to make mistakes like these, a prepaid card may save you money in the long run. Although prepaid cards do have fees, over time they may not add up to as much as the over-limit and late fees. Back to top.
Prepaid vs. Gift Cards
Although you pay for a prepaid and a gift card before the money can be spent, prepaid debit cards and gift cards are not the same. Gift cards are covered by the Credit CARD Act, which limits fees; prepaid debit cards are not. Prepaid cards can be used anywhere that accepts the brand (Visa, MasterCard or American Express, for example) and are not merchant-specific, as gift cards often are.
Prepaid debit cards are reloadable, and you must register your card, giving your name and address. Gift cards do not require that users register their cards (though it's a good idea, as you may have some recourse if your card is lost or stolen) and cannot be reloaded. Back to top.
When to Use Prepaid Cards
In terms of making purchases, prepaid cards can be used like any other credit or ATM cards. If you're not sure if you should get a prepaid debit card to begin with because you don't know if your credit is good enough to qualify for a traditional credit card, then you can use a tool like Credit.com's free Credit Report Card. It provides a clear breakdown of your credit standing, along with your free credit scores. It will also match you with credit cards for which you are likely to qualify. You can also use a credit card comparison tool, like this one, and filter the results to show only credit cards that match your credit profile. You can even use the tool to search for prepaid cards. Once you have your results you'll be able to compare the cards' fees and features. Back to top.
Given the sheer number of options out there, picking a credit card can seem like an incredibly daunting task. There are so many different types of credit cards, geared to different types of consumers, knowing where the decision making process can be a real challenge. The truth is that if you keep a few important principles in mind, choosing a credit card doesn't have to be stressful ... nor does it have to be a crapshoot. So let's get started.
Know Your Credit Score Before You Apply for a Credit Card
Knowing your credit score before you apply for a credit card is important, because particular credit cards are developed for consumers who fall within a particular credit score range. Here are the five generally accepted credit score ranges.
- Excellent Credit (750+)
- Good Credit (700-749)
- Fair Credit (650-699)
- Poor Credit (600-649)
- Bad Credit (below 599)
What this means is that someone with a credit score of 640 shouldn't be applying for credit cards meant for people with excellent credit, because he or she will likely be denied, and if you apply for too many credit cards at the same time, your credit score could suffer. Back to top.
How to Compare Credit Cards
In order to effectively compare credit cards you'll want to use a tool, like the credit card comparison tool on Credit.com, but you'll also need to know what to look for. There are a couple of key indicators.
- APR - This stands for Annual Percentage Rate and it represents how much you'll be changed for carrying a balance on your credit card. If you carry a balance of $100 for a year, and your interest rate is 10%, then you'll be charged $10. These rates vary based on your credit score. The better your score, the lower your rate is likely to be.
- Fees - Credit cards may have a number of types of fees associated with them. Annual fees, late fees, over-limit fees and loyalty fees are just a few. You'll want to make sure you understand which fees, if any, apply
- Rewards - There are lots of kinds of rewards credit cards available - cash-back rewards, mileage rewards, travel rewards and more. It's important to play close attention to the terms of the rewards programs, so you can compare them accurately.
Tips to Consider When Applying for Credit Cards
If you're not sure what your credit looks like, and, as a result, what kind of credit cards you should be applying, you can use Credit.com's free Credit Report Card for an easy-to-understand breakdown of your credit history, along with your free credit scores. If you see something that doesn't seem quite right, you are entitled to a free copy of each of your three credit reports once a year, and you can check them for inaccuracies, and ask the credit bureaus to correct them. Back to top.
FICO scores and credit scores are used to represent the creditworthiness of a person and may be one indicator to the credit type you are eligible for. However, credit score alone does not guarantee or imply approval for any credit card offer.
*For complete information, see the terms and conditions on the credit card issuer’s website. Once you click to apply for this card, you will be directed to the issuer’s website where you may review the terms and conditions of the card before applying. While Credit.com always strives to present the most accurate information, we show a summary to help you choose a product, not the full legal terms - and before applying you should understand the full terms of products as stated by the issuer itself.