Improve Credit History With Prepaid Credit Cards
November 21, 2008
The prepaid credit card must be secured by the applicant, by paying for the use of the card before actually using it to make a purchase.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.The credit line on the credit card will be limited by the security deposit amount, normally between $200 to $500, which has been prepaid for the use of the card.
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.If you have a weak credit rating or if you have no established credit, you may be denied by traditional banks.
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.Since your line of credit is secured by the deposited security amount, the credit card issuer is covered in case you default on the payments.The prepaid credit card is a good way to establish credit or rebuild poor credit and nearly everyone is eligible because these cards are guaranteed for payment by the prepaid credit card deposit.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..
You can conveniently use prepaid credit cards like traditional cards, where ever MasterCard or Visa is accepted.You can use prepaid credit cards online and offline, you can pay bills online and over the phone, and you can withdraw cash from ATM machines with them.
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.There are some other advantages to prepaid credit cards: eliminate the need of writing checks and money orders and going to the post office to pay bills, and you can also have your paycheck directly deposited onto your card for your convenience.
The prepaid credit cards also have some real disadvantages connected to them, such as interest rates that are often higher, over the limit fees of a higher amount 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.
If you are trying to rebuild your credit rating or establish one for the first time, you must be on time with your payments and be absolutely sure you do not exceed the limits of your credit line.Helping you to control your regular spending habits and to track how your finances are affected is the original reason prepaid credit cards were developed.
The late payment cycle is easy to find ourselves to be trapped in and soon we can be months behind and struggling with all of the late fees.By making on time payments consistently, you may find that most companies will increase your credit limit and/or return your deposit with interest.
Tags: credit repair
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