Prepaid Or Secured Credit Cards Can Help Establish Your Credit

By Author: Alisdair Cosgrove
Total Articles: 184
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You pay for the credit card before using it, this is why it is called a prepaid or secured credit card.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.You are required, as a rule, to pay from $200 to $500 as a security deposit and the credit limit on your card will be in line with the prepaid deposit.

Traditional credit cards are issued on a basis of whether or not you have a suitable credit rating, and when you are approved you will most likely have a specified credit line available to you.If you have a weak credit rating or if you have no established credit, you may be denied by traditional banks.

The issuers of prepaid credit cards may ignore the rigorous credit rating requirements used by traditional lenders and in some instances they may not even do a credit check or make verification of your employment.Since your line of credit is secured by the deposited security amount, the credit card issuer is covered in case you default on the payments.This is a simple way for people to rebuild ...
... their credit or establish a credit rating for the first time, and because these cards are secured by your deposit, almost anyone is eligible to receive one.Prepaid credit cards have a high approval rate because the overall restrictions on them are few, there could be age restrictions or U.S. citizenship may be required.

Every place you can use traditional credit cards such as Visa and MasterCard, your prepaid credit cards will be welcome.You may use a prepaid credit card in an ATM machine to get the cash you need to shop, or you can use the card to make purchases online or by phone and you can pay bills on the phone or online.

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.Other advantages to the prepaid credit cards are that your check can be directly deposited onto your card and it may also eliminate the need to write money orders and checks and go to the post office.

Some things that are disadvantages of the prepaid credit card are higher interest rates and over the limit fees, and a monthly maintenance fee.Some of the disadvantages of using the prepaid credit card may be the possible inability to rent a car at most car rental agencies and that security deposit that has to be paid before using the card.

It is of utmost importance for you to be on time with your payments and you must not go past the preset credit limits on your credit card agreement when you are trying to establish or rebuild your credit.Helping you to control your regular spending habits and to track how your finances are affected is the original reason prepaid credit cards were developed.

It can be too easy to get caught up in the late payment trap and before you know it, you are 60 to 90 days behind and the fees are continuing to add up.By making on time payments consistently, you may find that most companies will increase your credit limit and/or return your deposit with interest.
Alisdair Cosgrove is a freelance writer specializing in personal finance. You can read more of his work at www.JSNet.org for credit card comparisons including prepaid credit cards and also offers a comprehensive list of student credit cards. You can read more about credit cards from his on site article, 'prepaid credit cards are helpul for teens'.