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Nov
28

What Are Prepaid Credit Cards

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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.A deposit or prepaid specific amount of money which is sometimes called a “security deposit” will be have to be placed by the card aplicant into 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.

If you have applied for any traditional credit cards, you probably were approved or denied based on your rating and if approved, you were issued a credit card that has a specific limit on it’s credit line.If you have a weak credit rating or if you have no established credit, you may be denied by traditional banks.

Those lending institutions who issue prepaid credit cards may not bother to do a credit check or verify your employment, as they may eliminate the strict credit rating requirements usually enforced by the traditional credit card issuers.In the event that you may default on your payments, the issuer of the credit card will be have a guarantee of payment by the security deposit you had to put in their bank.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..

Prepaid credit cards can be used just as you would use traditional credit cards, anywhere that VISA and MasterCard is accepted these cards can be used with ease.These prepaid credit cards can be used to pay bills online and over the phone and to withdraw cash from an ATM, and you can also use them to make purchases online or offline.

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.The prepaid credit card offers you the convenience of not having to write checks and money orders and make extra trips to the post office in order to pay your bills, plus the added advantage of having your paycheck deposited directly onto your card.

There are some definite disadvantages to the prepaid credit cards; such as frequent high interest rates, a monthly maintenance fee, and higher over the limit and late fees.Some other disadvantages of prepaid credit cards are the fact that the cards may not be accepted as payment by car rental agencies and the security deposit which has to be paid before you can use the card.

Whether you are rebuilding your credit rating or establishing credit for the first time, it is very important for you to make your payments on time and you must be careful to not exceed your credit line limit.Prepaid credit cards were developed and introduced to help you control your finances and develop responsible spending habits.

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.

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