One question we get asked a lot is whether you can build your credit with a prepaid card. With credit cards, the answer is easy. Pay your credit card bill on time each month, and the payments get reported to the three major credit bureaus. But with prepaids, it’s not so simple.
A prepaid card does not involve borrowing money. Instead, you pre-load the card with funds, and the amount you put on the card is the amount you can spend or withdraw from an ATM. Because you are not borrowing money with a prepaid card, there are no payments to report to the credit reporting agencies.
Recognizing that consumers want options to improve their credit, however, some prepaid card issuers have created special credit-building features into their cards. These features come in two different forms: (1) online bill pay, and (2) short term loans.
Building Credit with Online Bill Pay
The first feature that some cards offer involves online bill pay. With some prepaid credit cards, you can log into the card’s website and pay bills online. Online bill pay is convenient, quick, and helps you avoid missed payments. Several prepaid cards offer online bill pay, but some have added a credit builder feature.
With the credit builder feature, the prepaid card reports certain of your monthly bill payments to certain credit agencies. AccountNow Visa and MasterCard offer this feature. Called Credit Builder, here’s how the AccountNow feature works:
- Activate AccountNow Bill Pay and add the FREE AccountNow Credit Builder service.
- Every time you make a bill payment with AccountNow Bill Pay, we will send your bill payment information to PRBC, a national credit reporting agency.
- Build a bill payment history to demonstrate your credit worthiness when applying for housing, credit, insurance, employment, phone, and utility hook-up by doing what you already to today – - paying your rent, electric, cable, insurance, and phone bills on time.
- Only Bill Pay transactions will be shared with PRBC. Regular debit transactions using your AccountNow Prepaid Visa or MasterCard will not be reported to PRBC.
The advantages of Credit Builder are that its a free feature that comes with the AccountNow prepaid card, and it doesn’t require you to borrow money. The disadvantage is that your bill payments are not reported to the three major credit bureaus. If you want credit information reported to the three major credit agencies, you have to move to the second option.
For more information, check out our list of prepaid cards with credit builder features.