Prepaid Debit Cards – How They Work
ByA prepaid credit card is perfect for individuals than have little or no credit history. It is also a great alternative to a bank account.
This is how prepaid credit cards work; first you deposit funds into your account/card. You use your card to pay bills or make purchases. Then the funds are taken from your account to pay for the purchases.
You can deposit funds by a variety of methods including money gram, western union, and direct deposit. Using direct deposit you can save hundreds of dollars on check cashing fees. It is free to sign up and use direct deposit.
Most cards offer an additional feature that allows you to use your account just like a checking account. You can write physical checks to companies or individuals. This can be used to pay bills such as car insurance, cable or rent. This will save you money because you will no longer have the need to pay for money orders.
You can also use you card at ATM’s to access cash. You will never have to pay interest or overdraft fees with a prepaid credit card.
Some cards also offer a feature called credit builder. This service keeps track of the payments you make using bill pay. It then reports those payments to a credit reporting agency. This can help you build positive credit and prove credit worthiness to future lenders. This feature is free with most cards.
These cards will be issued as a visa or mastercard. This means your card will be accepted everywhere the visa or mastercard logo is displayed. You can also use your card online and over the phone. You card will not say prepaid on it so no one will ever no the difference between your card and an unsecured credit card or bank card.
Prepaid credit cards approve everyone. There is no credit check or chexsystems verification. Thus you will be approved no matter your credit history.
In sum, prepaid credit cards are safer than carrying cash. They can be used like any credit card. If you don’t have a bank account they are a great alternative and everyone is approved.