Improve Credit Rating With Prepaid Credit Cards
You pay for the credit card before using it, this is why it is called a prepaid or secured credit card.This type of credit card requires you to deposit or pre-pay a specified amount of money, sometimes called a “security deposit,” in the bank of the card issuer.In most cases the required amount is between $200 and $500.00 and your credit limit is equal to the amount of your security deposit.
With traditional credit cards, you apply for credit and receive approval or you are denied based on your credit rating, then if approved, you are issued a credit card with a specified line of credit.When you do not have the necessary good credit rating already established, the traditional banks will not issue you a credit card.
The issuers of prepaid credit cards may ignore the rigorous credit rating requirements used by traditional lenders and in some instances they may not even do a credit check or make verification of your employment.The security deposit you prepaid to gain access to the line of credit will ensure that the issuer receives repayment if you should happen to default on your credit card’s monthly payments.The prepaid credit card can help establish credit or repair bad credit because the security deposit assures the card issuer of payment and most people are eligible.Although you may get instant approval on these prepaid credit cards, there could be restrictions, such as having to be at least 18 or 21 years old or you may have to be a citizen of the U.S..
Traditional cards like MasterCard and Visa and prepaid credit cards are all readily used and accepted in all of same instances and the same places.You may use these prepaid credit cards in an ATM machine to get the cash you need to shop, or you can use the card to make purchases online or by phone and you can pay bills on the phone or online.
Some of the advantages of prepaid credit cards include the ability to establish or rebuild a good credit rating and help to avoid making late payments.Other advantages to the prepaid credit cards are that your check can be directly deposited onto your card and it may also eliminate the need to write money orders and checks and go to the post office.
Some things that are disadvantages of the prepaid credit card are higher interest rates and over the limit fees, and a monthly maintenance fee.Other disadvantages of prepaid credit cards are the necessity of paying security deposits which must be put down before you can use the card and the reality that these cards sometimes will not be accepted by car rental agencies.
It is of utmost importance for you to be on time with your payments and you must not go past the preset credit limits on your credit card agreement when you are trying to establish or rebuild your credit.Prepaid credit cards were added our list of financial sources to help us learn to keep track of where our money is going and how we can control what we are spending.
It is easy to allow ourselves become involved in the late payment cycle and before we realize it, we are two or three months behind and the fees keep getting higher and higher.If your payments are made on time consistently, many credit card companies will increase your credit line limits and may possibly return your deposit with interest.
