Prepaid credit card
Prepaid credit cards can easily confuse many users, although they have the benefits of a credit card they are usually accepted for anyone regardless of their credit rating, and is the first port of call for those who want the benefit of a credit card without many of the risks.
A prepaid credit card works rather like a debit card, in that the money is not loaned to you, but is already on your account, because you have already put it there, so any purchase or transaction is just being taken from your account balance.
Credit card providers have found that it is even more profitable to allow prepaid credit cards especially for those with bad credit, as they can still charge a monthly usage fee, along with all the charges that come with using a credit card, such as a late payment fee, and since hardly any credit check is being done, can also charge a high interest rate for balance transfers and purchases.
For a normal credit card, the issuers of the credit card; usually the banks make their money from the interest charges, and late payment fees associated with the card, while the card providers i.e. Mastercard, Visa, Discover e.t.c make their money from charging retailers for acepting the card, in some cases the issuer is also the card provicer as in Discover, Capital One, and American Express, meaning they have an opportunity to make even more money, add a prepaid credit card to that mix, and seeing they don’t even have to offer a loan, which is basically what a credit card is, the profits can be astronomical .
However with these seemingly extortionate charges from every angle, having a credit card even a prepaid one can prove useful, especially for conducting online transactions as many services require the use of a credit card, even a prepaid credit card since it undoubtedly has the issuer’s logo, which is usually Mastercard or Visa will be accepted.
Ideally a normal credit card from your bank where you have a long standing account with them should be your first port of call, but if your credit rating and score is the issue, then a prepaid credit card can prove it’s worth, if you are looking for all the advantages of a credit card, and less risks of falling into debt.
Generally credit cards prove their worth as most retailers can offer cashback, even if it’s a prepaid credit card, which can come in handy if stuck in a rural area without a cash machine in site, but only the local grocery store which fortunately accepts credit cards. Although these type of transactions are considered cash transaction which generally have a higher interest rate than normal purchases, in an emergency they do prove their worth.
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Filed under: credit cards for bad credit