How A Prepaid Credit Card Could Help You

It seems that most people have a credit card these days. Credit cards are useful for online transactions, car hire and general money management. The trouble is that people with a poor credit rating can't usually get them. People may have a poor credit rating because:

• they have been late paying credit bills
• they have missed payments on credit agreements
• they have County Court Judgements (CCJs) against them
  

All of these factors can make it for people to get a credit card. However, there are some options that can help people with poor credit. One of these is a prepaid credit card.

How A Prepaid Credit Card Works

A prepaid credit card looks just like a credit card. It is plastic and has a credit card logo. However, it is more like a debit card than a credit card. It works like a mobile phone top-up card. You just top up the card with a certain amount of credit and you can spend that amount in the places where you would normally use a credit card.

To qualify for the prepaid credit card, all you need to do is prove your name and address. Since it is not really a credit card (that is, you are not borrowing money but rather using your own) there are no credit checks and there is no interest to pay. All you need to do is add the sum you want (up to £5,000 on some cards) and then spend, spend, spend.

Since you can't spend more than the money on the card, prepaid credit cards are a good way of regulating spending. Some people use them for children or employees. They are also a good option for paying for purchases while abroad.

Charges For Prepaid Credit Cards

Since no interest is charged, card issuers have to make their money another way. Some card issuers charge a processing fee for creating the prepaid credit card. They may also charge additional fees for topping up the card by different methods, withdrawing money at the ATM and transferring money from the card to other cards or accounts. It is worth examining the charges very carefully so you can be sure of what payments you will be making.

Alternatives To Prepaid Credit Cards

Another credit card option for people with a poor credit history is a secured credit card, which is a relatively new product in the UK. A secured credit card is a credit card offered to people whose credit history includes defaults, arrears, CCJs and discharged bankruptcies.

Borrowers need to pay a security deposit to get a secured credit card. The repayments and interest rate are higher than with unsecured credit cards. However, if managed properly, secured credit cards can be used to repair your credit history. Card issuers report how the card is managed to Equifax and Experian, the credit reference agencies. Good management will improve your credit report and will result in an increased credit limit.

More Information:

• Secured or Pre-Paid Credit Cards
  So you need a credit card for emergencies, peace of mind, or for your teenage child but aren’t willing to go into debt for it? The answer might just be a secured or prepaid credit card.
• Credit Building Tactics
  Much is written about credit ratings, the score against an individual’s name, that rates their eligibility for credit. This article discusses different methods that you can use to try and build a new, better credit rating.
• Applying For Credit Cards When You Have Bad Credit
  For those with a poor credit score, getting a credit card is harder. However, there are solutions and we will discuss and offer these in the article.
• Using Your Credit Card To Build Credit History
  Let’s say you want to buy a house, but you need to get a mortgage to help pay for the house. However, you have no credit history to speak of, so how can you apply for the mortgage to get your dream home?
• Secured Credit Cards Vs. Unsecured Credit Cards
  During the course of an evening it is possible to hear variations of all three of the sub-captioned claims. The truth, however, is a little more moot. So what is the debate between secured credit cards and unsecured credit cards?