What Are Prepaid Credit Cards?
Many people are rejected after filling out a credit card application because of poor credit. The problem with this is that a major credit card is often needed for important business transactions like making hotel or airline reservations. Credit cards are also necessary when placing online or phone orders. For those with bad credit, prepaid credit cards open up the possibility of engaging in these transactions. These cards also may be used by parents that want to give their children credit cards to use while limiting their purchase power.
Also known as a secured credit card, a prepaid credit card is much like a regular credit card, only the credit limit is generally lower than a regular card and that credit limit is based on a security deposit that the account holder must make in order to use the card. A prepaid credit card is different than a prepaid debit card in much the same way that a regular credit card is different than a regular debit card. A prepaid debit card deducts funds from the amount of money deposited into the account associated with the card whereas a prepaid credit card makes purchases on credit.
A prepaid credit card account is opened by depositing money into that account. Much in the same way, you would make a deposit to open a checking or savings account. Once the money has been deposited, the account holder is issued a physical credit card that can be used in the same transactions in which regular credit cards are permitted. Perhaps the best part of the prepaid credit card is that spending cannot go so far as to send the account holder into debt. The purchasing power of that card is limited to the amount of the security paid upfront in order to secure and use the card. Furthermore, because of the security deposit required, bills are unnecessary and interest charges or late fees aren't possible. In this respect, prepaid credit cards are similar to debit cards linked to a savings or checking account.
Prepaid credit cards typically come with an additional account set-up fee. In addition, additional fees will be imposed each time more cash is deposited into the prepaid credit card account. For those with bad credit, the benefits of a prepaid credit card far outweigh these extra charges. Prepaid credit cards make it possible to make reservations for such things as hotel rooms and pay for things like car rentals all while avoiding the possibility of interest charges.
The prepaid credit card for Canadians is sometimes referred to as a secured card. There are four benefits of prepaid credit cards.
Guaranteed Approval credit card
There are many people who are visiting this site who have bad credit, starting off new with a new credit rating and are very eager to have a guaranteed approval CC. This ensures that they receive a credit card and start their credit rating with Equifax and TransUnion.
Rebuild your credit score
If somebody has bad credit, they want to be sure that they can rebuild their credit score with certainty. I read a post on another site today where a fellow who had immigrated to Canada 5 years ago indicated that he was doing well financially but had no credit cards and thus no credit rating. This gentleman expressed that this was very inconvenient for himself and his family. This is limiting as without a credit score, he won't have a chance of applying for a mortgage or car loan in the near future.
Convenience of using a credit card
Millions of Canadians take for granted the use of a credit card for day to day purchasing activities. Things like renting a car or hotel room usually require the use of a credit card. Without a credit card, it makes travelling more difficult. This prepaid CC gives it users the flexibility that other people have on a daily basis. A few other points of convenience are that you can make payments online and you don't have to carry around large amounts of cash with you.
Security deposit
As little as $75.00 a security deposit means that you're guaranteeing that the credit card will be paid off. This is the part where the credit card is prepaid. A small security deposit of $75 makes it allot more convenient for the majority of Canadians to obtain one. It's important to explain here that the above is a description of secured credit cards in Canada. While these types of CCs are relatively new in Canada, the terminology secured credit cards may get confused and interchanged with prepaid credit cards.
See Also
Best Credit Cards Canada
Best Balance Transfer Credit Cards Canada
Best Cash Back Credit Cards Canada
Best Capital One Credit Cards Canada
Best MasterCard Credit Cards Canada
Best MBNA Credit Cards Canada
Best Visa Credit Cards Canada
Best Secured Credit Cards Canada
Travel Credit Cards Canada
WHAT ARE PREPAID CREDIT CARDS?
