Prepaid Charge Card Information

A prepaid charge card is similar to a regular credit card. Both cards carry a credit card logo, and both cards can be swiped at the point of sale, without the need for a PIN to be entered. There are three major differences with a prepaid charge card: no application, the cardholder controls the "limit" of the card, and in most cases, prepaid charge card payment records are not reported to the credit bureau.

No Application 

With a prepaid credit card, there is no application and no credit check. While cardholders will have to fill out paperwork similar to a credit card application to have a card issued in their name, there is no approval process. Federal law requires each prepaid credit card holder provide their social security number for tracking purposes, rather than credit check purposes. You do not sign consent for your credit report to be pulled when you are filling out the paperwork to get a prepaid card.

Control over Limit 

As the money is loaded on to the card before it is spent, the cardholder is complete control over the limit on the card. While the issuing bank will have limits to the amount that can be loaded on the card at one time, and a maximum amount to be on the card at any given time or spent within a 24 hour period, these amounts are in place for the protection of the consumer if the card is ever compromised through loss or theft. Generally the limits are higher than most people ever need. The limits will likely vary depending on the issuer of the card so this is something to research before getting a card. Some companies will be able to provide temporary exceptions to the rule for one time large purchases, while others will not. This is also something to inquire about before getting a card.

Not Reported to Credit Bureaus

While there are some prepaid credit cards that do report your information to the credit bureaus, these are specifically meant to help rebuild your credit and will disclose this information to you before you apply for the card. A traditional prepaid credit card does not report to credit bureaus because there is no need to do so. 

While there are fees associated with a traditional credit card, there are different fees associated with the use of a prepaid charge card. Prepaid charge cards will not have over the limit or late payment fees, but they may be riddled with monthly maintenance, per transaction and balance check fees. It is important to read the terms and conditions of each card before deciding which one to get. Like a traditional credit card, there may be another card issued to a joint account holder for the account, but it will also incur fees. In most cases, cardholders will have to pay a nominal onetime fee, usually $10 or less per card to be able to carry it. Similar to an annual fee, but much cheaper, it is required so that the issuer will personalize a card for each person.

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