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Pre Paid Credit Cards
How pre paid credit cards work
Pre paid credit function essentially the same as debt cards and regular credit cards. The difference lies in how they are funded. Pre paid credit cards operate on funds you deposit, typically in a savings account with the card issuer. Depending on the issuer of the card, you will make a deposit of a certain amount of money. This money will then be available to you for purchases on the prepaid credit card. For example, if you deposit £500.00 with the card issuer, your credit line will be that same amount. When making a purchase online or in person, these prepaid credit cards function exactly the same as any regular credit card.
Why Pre paid?
Prepaid credit cards are typically used by those unable to secure normal credit based credit cards. This can be due to poor credit history, no credit history such as young adults, bankruptcy, or other reasons which limit your credit worthiness. These days living without the ability to make credit card transactions is nearly impossible. Most hotels, car rental agencies, and nearly all online purchases require a credit card. Now with a prepaid credit card you will be able to access all of these facets of life, and be able to make online purchases securely. For many people, a prepaid credit card will be their first available to option to start enjoying the benefits of credit card purchases while building a credit history.
What are the advantages to having a pre paid credit card?
In addition to the ability to make purchases everywhere a credit card is accepted, there are other distinct advantages to having a prepaid credit card. Having and maintaining a prepaid credit card will help you to build your credit. Typically a credit card issuer will monitor a prepaid users account for on-time payments and account history, and then offer a regular credit card within a few months. The issuer will see if you are able to manage the card, make timely payments, and will reevaluate your credit worthiness based on this information. If offered a regular credit card, your initial deposit amount will be returned to you, and your credit line increased incrementally as you demonstrate the ability to pay.
Additional uses for a prepaid credit card
Many businesses are finding that prepaid credit cards can be beneficial in managing employee expenses. Issuing a card to an employee for business trips for example, gives the company the ability to limit and monitor how much money can be charged to the card, without fear of excess charges. Also many parents enjoy the security of giving their children access to credit card purchases, with the security of knowing the limit their children are allowed to spend and manage.
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