Prepaid credit cards

True. The only problem about it is that you can't build your credit score with prepaid cards. Otherwise, that would be the way that I would go. You also have to watch the prepaid cards because some of them charge much higher fees than others.

 

I've read that pre-paid credit cards are for people who are trying to re-build their credit. They deposit a certain amount of money on the card before using it. Each transaction reduces the amount available on the card. That way the individual is able to slowly re-build their credit score and the creditor is guaranteed to be paid. It seems like it would take forever to re-build credit this way, don't you think?

 

That is very true. But the downfall is that you can't build up your credit with prepaid cards

 

No, a prepaid card will never be the best option. The purpose of the card is to build credit. All a prepaid card shows is that you have difficulty doing that. A prepaid card is no different from a savings account, if you really think about it. You're giving someone else your money to hold until you are ready to spend it, except you are paying exorbitant fees for them to hold it.

 

That is not true. People who have declared bankruptcy can only use these prepaid credit cards in order to re-build their credit. They won't be issued normal credit cards until they have redeemed their credit-worthiness through the use of prepaid credit cards. Trust me, I've worked for bankruptcy attorneys and have heard all the horror stories. The truth is, credit should have never been invented in the first place. If you don't have the money then you shouldn't be allowed to spend it.

 

I agree with this. It seems like the OP is talking about "secured credit cards". Unless they have changed within the last decade, you'll pay through the nose. I have heard more than a few nightmares around these cards. Capitol One being one of the worst. Miss a payment or go over your limit and you will get hit with severe penalties.

I do use prepaid credit cards, especially when travelling or buying online. I suppose they are more like gift cards, but a few have my real name and address attached to them and have the MasterCard-Visa-American Express logos on them.

 

I freaking hate these things.

I hate that there is a fee if you overdraft. I hate that when you buy one, you often have an "activation fee" (though maybe that is gone now, I heard there might be legislation about this in the last few years). I hate that I can't swipe the dang things at the pump when I'm buying gas. I am seriously surprised and mind blown that anyone likes these things. I've received them as gifts, as rebates (instead of checks, maddening), and as "rewards" for weird things like customer satisfaction surveys. I think they are even worse than gift cards.

 

It's a lot safer and cheaper, specially for younger people who don't understand nothing about economy and those types of things. Just roll with this safe choice and you shall be alright.

 

Prepaid cards have their place. I have an American Express prepaid card to use for online purchases. It's attached to my Netflix account too. It comes in handy when traveling. American Express isn't accepted in as many places as Visa and MasterCard, but I never have had problems. It's very convenient.

 

Pre-paid cards do not re-build credit. They act like a debit card. It gives you access to money by swiping a card but does nothing for credit. A secured credit card re-builds credit. This is a card where the card holder sends money to a bank and they get a line a credit equal to the amount they send in. Then they can charge (pay interest and fees) and have their payment history reported to the credit report companies. I have worked in banking for over 10 years and people often get the pre-paid and secured credit cards confused. Folks think debit cards help build credit too and it doesn't. If you leave an account in the negative it will hurt your credit, but good account management does not help your credit.