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Prepaid Credit Cards are also known as Stored Value Cards.
These are very useful for unemployed people, for those with
a bad credit history or are unable to avail of an unsecured
credit card. They are also good for spendthrifts unable to
control their urges to spend. It helps prevent them from over
stepping their limits and getting into credit card debt. If
you are looking to build your credit history, ensure that
the prepaid credit card issuer reports all the cardholder
transactions to the credit bureaus namely Experian, Equifax,
and Trans Union.
It is relatively easy to obtain a prepaid credit card. There
is no credit check or employment verification, primarily because
the funds that you use in a prepaid credit card are yours
and not that of the prepaid credit card issuer. The spending
limit on your prepaid credit card will be restricted to the
amount of cash you put in to your credit card account. Prepaid
credit card usually comes with the Visa or MasterCard logo.
It can be used anywhere MasterCard and Visa is accepted. The
exceptions to this are some car rental companies and while
setting up automatic recurring payments.
In a prepaid credit card, the expenses on your transactions
are deducted from the amount you have put into your account.
In a debit card, the money is subtracted from the checking
account and could lead to Non-Sufficient Charges (NSF) being
levied on you. This occurs when a customer exceeds the balance
in his checking account after making purchases or excess withdrawals
form the ATM. This problem will never occur with a prepaid
credit card holder as he does not have any borrowed money
and can only spend what is there in his checking account.
Also, with prepaid credit cards there is no interest charge,
because you are using you own money. However, a prepaid credit
card requires a set up or application fee while getting one
and then a small fee each time you load your account. You
can also fund you account through a wire transfer or cash
deposit at certain locations approved by the issuer.
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