- Prepaid credit cards offer a way for consumers with limited or poor credit history to obtain a Visa or MasterCard. A prepaid credit card works just like a regular credit card, consumers can use the card anywhere online or offline that accepts MasterCard or Visa. Many prepaid cards also work similar to a checking account, allowing consumers to direct deposit their paychecks on to their card and pay bills.
- Prepaid credit cards have very few qualifications and most companies do not require a credit check. To obtain one of these cards a consumer will need to complete an application and set up funding for the card after the company verifies their identity. Consumers can fund their card using direct deposit, a checking or savings account or with cash.
- Prepaid credit card agreements come with fees. Most issuers will charge a monthly fee for the service. For example, the Mango Prepaid Visa has a $5 per month fee, according to Bank Rate. Issuers may also charge a start up or activation fee, a fee for using direct deposit services and a fee for online banking if the intuition provides the service.
- Unlike a traditional credit card, prepaid credit cards do not accrue interest charges as the consumer can only spend money they add to the card. This may be helpful for people who have trouble managing credit. Some prepaid cards come with other benefits. For example, the Baby Phat Prepaid Visa by RushCard includes a prescription discount service that allows customers to receive up to 85 percent off the price of prescription medications, according to Bank Rate.
- A prepaid card is not a secured credit card. With a secured credit card, the consumer makes a one-time security deposit and is then free to use the secured card like a normal credit card. With a prepaid credit card, the consumer must make regular deposits to their card and can only spend the amount put on the card.
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