Everything You Always Wanted to Know about Prepaid Credit Cards

A Credit Article Contributed by Melanie Vannuys

What is a Prepaid Credit Card Anyway?

A prepaid credit card, sometimes called a stored value card, is the ONLY credit card available that offers 100% guaranteed approval - regardless of credit history or employment. How can that be, you ask? Because a prepaid credit card is guaranteed by funds you deposit into your account. The funds can come from a payroll check, electronic transfer,Western Union, checking or savings accounts or by using the cards approved deposit slips or U.S. money order.

Once you have deposited the funds, depending on the type of deposit method you choose, availability can range from the next business day (deposited from a debit or similar card) to up to five business days (from payroll, checking or savings accounts and money orders)

There is no maximum amount that can be funded from your payroll checks or employer. However, you may not deposit (or load) more than $1000 at any one time (the minimum is $25)and you may not load the card more than twice a day or ten times per week, nor more than $1500 a day or $5000 per week.

As for the spending limits, you are not allowed to spend more than the amount of funds in your account. Excess activity on your account may result in card suspension until an investigation is conducted - to prevent fraudulent use. You can also use your prepaid card at any ATM machine - but the maximum withdrawal in a twenty-four hour period is $300 - regardless of your balance. Basically you can use your card anywhere it's accepted, as long as you follow the spending guidelines set forth in your agreement.

Where Can I Get a Prepaid Credit Card?

Most of the major credit card companies offer prepaid credit cards. Nearly all of the companies offer 100% guaranteed approval, no credit checks and in most cases, no annual fees.

What are the Benefits of a Prepaid Credit Card?

Prepaid credit cards essentially offer the same benefits as a traditional credit card. The credit limit on your prepaid card is equal to the amount of funds in your account. Therefore, you can use it as you would other cards - book a flight, rent a car or use it to purchase items wherever your type of card, either Visa or MasterCard, are accepted.

Some consumers will argue that the best benefit of a prepaid card is that there are no credit checks and guaranteed approval. For consumers with bad credit or no credit, this is a definite plus.

Prepaid cards are safer to carry than cash. If the card is lost or stolen, you can contact the issuing company immediately - just like with a standard credit card.

Also, many of the prepaid card companies offer online account access, no employment verification and will allow you to use your prepaid Visa or MasterCard to pay your bills online, thus saving you the expense of postage and money orders.

While the idea of "no credit checks" is appealing, you should know that a prepaid credit card should not be an option for re-establishing credit. Because the credit limit is based on the available funds in your account, there is no actual "credit" involved, and therefore, no way to develop a positive payment history.