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Prepaid debit cards can be an option, allowing customers to enjoy the ease of direct deposit, the flexibility of a being able to pay with plastic, and the organization of online bill pay.
These cards work a lot like a gift card; you will have to load the account with cash (direct deposit is usually available) before you can use it for a purchase. Let’s take a closer look at what prepaid debit cards offer.
[Related Article: The First Thing to Do Before Applying for a Credit Card]
These cards look like credit cards and can be used for most situations that require a credit card. However, they are not credit cards. Instead of granting you a credit limit based on your financial standing, these accounts require you to “load” the card with your own money.
Getting a prepaid card is usually easy, even if you have credit problems. You can’t get into debt using a prepaid card, since you cannot spend more than the balance you have deposited. (A few cards may allow you to overdraft the account, but most don’t. If they do allow overdrafts, you may be charged a fee.) Also, you will not be charged interest for your spending.
Other pros of prepaid debit cards:
[Credit Cards: Research and compare prepaid cards at Credit.com]
The Cons
Prepaid debit cards do not report your payment history to the credit bureaus, so this type of card will not help you improve your credit. (If you’d like to see your credit standing, along with your credit scores, check out Credit.com’s free Credit Report Card.) Prepaid cards cannot be used in all situations. For example, hotels and car rental agencies will not allow you to use a prepaid card to secure your rentals.
Other cons:
Fees and charges can vary significantly between different prepaid credit card offers. Be sure to read the fee schedule for the prepaid credit card before you apply.
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