Copyright (c) 2010 Tara Tiemann

Most consumers are ditching their regular credit cards in favor of prepaid credit cards. For one, it is much easier to avail. Since you are provided with a credit line, issuers of this type of cards are more lenient in approving an application. However, it is important to note that a prepaid card does not give you the privilege to purchase things or pay bills in advance and just pay it a later time. But this is not a problem to some consumers. What's important is that they can easily get a prepaid card regardless of their credit history and ranking.

Who Should Get A Prepaid Credit Card?

Who are the best candidates for owning a this type of card? There are lots of prepaid card issuers that provide credit reporting services to major credit bureaus nowadays. Hence, prepaid cards can now be used as tools for establishing credit history or for repairing bad credit history. Despite the limitations, not having a credit limit can actually help the cardholder exercise control over his/her spending and avoid debt accumulation.

Parents who want to provide their kids with a credit card can also opt to get a prepaid credit card. If you have kids in college and they stay at boarding school, prepaid credit cards are great tools to use for sending and receiving cash.

Individuals who are frequently on trips can also find prepaid credit cards beneficial. Prepaid cards with VISA or MasterCard logos are accepted in a lot of merchants and establishments worldwide so instead of carrying a big amount of cash for spending, a traveler can simply carry a prepaid card as a safer mode of payment.

How to Get A Prepaid Credit Card

As we have mentioned at the beginning of this article, individuals with poor credit rating who may not qualify for a standard credit card can start rebuilding credit using a prepaid account. In order to start using this type of card for payment, you will simply need to submit the minimum required amount of cash deposit.

Generally, providers of this type of cards require at least $200 of cash deposit while some will ask for a minimum of $500 or more. The value of security deposit submitted will also determine the borrowing limit of the prepaid account owner. In some instances, the bank may extend a slightly higher or lower limit than the amount deposited. It is important to understand that without an existing balance in the cardholder's deposit account, the prepaid card cannot be used for transactions.

Prepaid credit cards do not charge interest rate fees since purchases are instantly paid off using the available cash in the cardholder's account. However, there are other fees associated with prepaid credit cards that you should know about. Set up fee, maintenance fee, transaction charges and penalty fees are just some examples of fees you have to pay when you have a prepaid card.

The specific costs will depend on the issuer so it is important to check out the exact Terms and Conditions before acquiring a prepaid card. It is also important to make sure that your chosen prepaid credit card issuer will report to the bureaus since not all prepaid cards offer this type of provision.