A prepaid credit card is a reloadable card that can be used to make purchases. These purchases can include online purchases, paying bills and making ATM withdraws. The card has either a Visa or MasterCard logo on it which means it can be used anywhere Visa or MasterCard debit is accepted. This is just about anywhere! Using a prepaid card can be an alternative to using a traditional checking account, credit card or carrying cash. Prepaid cards offer a variety of benefits to users, like there’s absolutely no risk of going into debt. Funds have to be loaded to the card in order for the card to be used. Each card has restrictions on how much or how little can be added to the card. Once the money on the card is spent, you just add more money to the card.
Is This A Credit Card
No. A prepaid credit card is not a credit card. The reason is because it is not a line of credit. When you apply for a credit card you are essentially applying for a loan. The credit card company has strict requirements on who they will approve for a card and your approval is based on your credit history. This is not the case with a prepaid card. Anyone is eligible for a card because you have to put your own money on the card in order to use it, you are not borrowing money from a bank.
Common Prepaid Card Fees
The fees a prepaid card charges vary from card to card. It is important to determine which fees are charged before you apply for the card. That way there are not any surprises and you know exactly what the cost of the card is. You can always check the card terms and conditions for a list of the fees. Below are some of the common fees that prepaid cards charge, but this is not every fee.
- Activation Fee: An Activation Fee is the fee that is charged when you first activate the card. Some cards call this fee a start up fee. Its basically just the amount you have to pay to get the account started.
- Monthly Fee: The Monthly Fee is the reoccurring fee you pay once a month for the card maintenance. It’s really just the charge you pay to be a card member. The fee is usually between $5 and $15 and the charge is automatically deducted from your account balance.
- Transaction Fee: A Transaction Fee is the charge you incur when you make a purchase with your card. Some cards only charge a fee when you make a purchase without your PIN.
- Load Fees: A Load Fee is the charge you incur when you add money to the card. Often there are ways to avoid this charge.
- ATM Fees: The ATM Fee is the fee you are charged when you withdraw money from an ATM. Some cards charge an ATM fee when you get your account balance from an ATM too.
Loading Money to the Card
Each card works differently, but basically you have options when it comes to putting money on the card. Most cards offer direct deposit. This is when your paycheck or government check is electronically deposited to the account. There are many great benefits to using direct deposit such as, you don’t have to pay to get your check cashed anymore. You also have the option to load the card with cash, credit card, or bank transfers. This is done by going to one of the loading locations specified by the card. An example would be Western Union, Green Dot, or even Wal-Mart.
Popular Features of Prepaid Cards
All cards have special features they offer in order to make their card attractive. Here is a list of some of the popular features you will find.
- Online Bill Pay: Online bill pay gives you the option to pay your bills using the prepaid cards bill pay service. The card might charge a fee for this. You can pay your utilities, rent, or whatever. The service will send your payment electronically or send a paper check on your behalf.
- Credit Builder: Not all, but some cards help build positive credit. When you pay bills with the prepaid card this information is reported to a credit agency. If you want to build positive credit make sure you look for a card that offers a credit building service.
- Direct Deposit: Most cards offer direct deposit as a way to load the card. This is when your employer electronically deposits your paycheck to your card.
- Online Account Access: Most cards also offer online account access. You can get your balance, view your statement, and see account history.
Requirements for Applying
When it comes to your credit history you don’t have to worry. It does not matter if you have good or bad credit you will be eligible for this card. Remember this is because this is not a credit card. However, there are some requirements set up by federal law. For a reloadable prepaid Visa or MasterCard, your name, address, date of birth and social security number are required. You have to provide this information or you can’t get the card.