Prepaid Credit Card

A prepaid credit card or a prepaid debit card is similar to a normal credit card, except that it comes without any credit provision by the card issuer. It has a pre-determined card limit and the cardholder has to recharge or pre-load his account by depositing money in it. Therefore, it is also called a Stored-Value Card.

Prepaid credit cards are available in a number of forms, including a multi-purpose prepaid card, non-reloadable or gift card, prepaid travel card and payroll card.
Prepaid Credit Card Features

The basic features of a prepaid credit card include:

* It carries a brand name (MasterCard, Visa, Discover or American Express).
* It can be issued to people with a bad credit history.
* Cash can be withdrawn with a prepaid credit card from any ATM machine.

* It has a 100% approval rating as it does not require any credit checking.

Advantages of Prepaid Credit Cards

Prepaid credit cards have various advantages, such as:

* It is safer and more convenient to carry a prepaid credit card instead of cash.
* It is a good substitute for traveler’s checks while traveling abroad.
* It can be issued to minors and students.
* It offers a check on spending, since there is a fixed spending limit. This helps to prepare a budget for various expenses.
* It can be used in businesses to take care of petty-cash transactions.
* It provides freedom from debt.

Disadvantages of Prepaid Credit Cards

Prepaid credit cards, however, also have certain disadvantages:

* A fixed charge and fee is applicable on their use.
* They are not always accepted for online transactions.
* Since they have a fixed amount pre-loaded, the funds could be insufficient in case of emergencies. It does not have an overdrawing facility.

Banks Issuing Prepaid Credit Cards

A number of banks issue prepaid credit cards, including:

* Citibank
* American Express
* Bank of America
* Capital One
* Chase
* Standard Chartered
* Deutsche Bank
* HSBC

How to Apply for a Prepaid Credit Card

Applying for a prepaid credit card is similar to applying for a normal credit card. However, before assigning a credit card to a person, his/her credit-worthiness is checked thoroughly. This is done to prevent default on the credit. A prepaid debit card does not require such checking, since the issuer does not extend any credit to the cardholder. Therefore, applying for and acquiring a prepaid card is easier and faster.

A prepaid credit card is best suited for people who have poor credit ratings or those who are unemployed as they face a lot of problem in acquiring a conventional credit card. It helps these people to gradually build-up their credit record