5 Benefits of a Pre-Paid Credit Card

Nearly every credit card company, such as Visa or MasterCard, provides a pre-paid credit card. This is not a "gift card" like some companies allow. This is an actual credit card in your name, and it is used like a credit card wherever you purchase. There are a few important benefits associated with these cards:

No Credit Check

Many people who get turned down for traditional credit cards opt for the prepaid route. You do not have to have a good credit score to be issued one of these cards, because the company is not actually providing you with any credit. You are prepaying, meaning you are basically making the loan to yourself. As long as you have enough cash to load the card with, you will be able to gain approval for this type of plastic.

Easy to Set Up

There is no application process beyond a simple verification of your identity and eligibility to have a bank account in the United States. You will have to pay a fee to set up the account, but this fee is typically only $5 or $10. Providing your name, the small fee, and a few other details is all you will have to do to get your credit card set up. In fact, you may be able to complete the transaction through the Internet if you already have a bank account with a participating bank.

No Debt or Interest Rate

Because this is not an actual credit line, you are not doing into debt at all to have one of these credit cards. You will never have to make payments on the card since payments are made in advance. Further, there is no interest rate on the cards, because they are not loans. There are monthly maintenance fees to deposit more money. However, the cost of these fees will be worth the value for people who do not otherwise qualify for a credit card.

Protect Against Theft

Cash and cash gift cards can be stolen or lost and used without you being there. With a credit card, you will have to present photo identification and sign off on all transactions. If you lose your card, you can cancel it and have another issued. You can also report fraud if you suspect someone else has gotten a hold of the information. This option has far greater theft protection than simply carrying cash wherever you go.

Make Reservations when Necessary

The main reason people opt for a pre-paid card is because you need a credit card for some transactions. For example, a hotel, airline or restaurant may require you provide a credit card number to hold your reservation. If you do not have a credit card, you may not be able to ever buy tickets with a major airline. There are other situations where no cash is taken, and the card is a great stand-in for people who do not carry credit cards in their wallet.

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