Prepaid credit cards are very similar to debit cards. To use a prepaid credit card you must load money onto it. Every time you use your prepaid credit card, the amount you purchase is deducted from your prepaid balance. Your credit card limit is equivalent to the amount of money left on the card.
Prepaid cards are useful if you don't like carrying cash and like the convinience of credit cards. Prepaid cards are different from debit cards because prepaid cards are not linked to a checking account.
Here are the advantages of a prepaid credit card:
* They offer the same convinience of any credit card. It's safer than cash, it allows you to shop online, allows you to rent cars, reserve hotels, and reserve flights.
* You can never spend money you don't have. Unlike a credit card, you're physically limited by the money you place on your card when you make purchases to ensure you don't fall into debt.
* It allows you to qualify for an unsecured credit card if you choose to get one. After building a history with a card issuer, the issuer will typically offer you an unsecured line of credit.
* No overdraft fees. Unlike a checking account you're not allowed to spend more than you have in your account with a prepaid credit card.
* Guaranteed Acceptance. Most prepaid cards will accept anyone who applies and is over 18 years old.
A disadvantage of prepaid credit cards is that they don't give you a line of credit. You can only spend money that you load into the card. This is also an advantage if you're already in debt however.
Another disadvantage of prepaid credit cards is they often come with high fees. Prepaid credit cards can come with application fees, processing fees, activation fees, maintenance fees, all of which can total up to $150.
Fees for each prepaid credit card will vary widely from card to card, so it pays to do your research on which prepaid credit card comes with the least amount of fees.
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