What Everyone Should Know About Prepaid Credit Cards

What Exactly Is a Prepaid Credit Card?

Think of a prepaid credit card as a cross between a traditional credit card and a store gift card. With a prepaid credit card, you pay up front for a certain denomination that is put on the card and you can use it wherever that type of credit card is accepted. As you use the card to pay for purchases, the available "credit" goes down by the purchase amounts.

Why Use Prepaid Credit Cards?

There are many good reasons to use prepaid credit cards. Maybe you want your child to have credit card access in an emergency, but don't want an actual credit card in their wallet? Maybe you want to make online purchases, but prefer not to use your actual credit card information online? Whatever the reason, many people have found numerous uses for prepaid credit cards.

What To Look For

Now that you know why you might want prepaid credit cards, it's time to know what to look for when shopping for them. First and foremost, it's important to understand that buying prepaid credit cards online isn't always a good idea.

Some companies charge as much as $6.95 to mail you a prepaid credit card, not to mention other "processing" fees on top of the transaction fees they charge. Don't let these companies take advantage of you. If you're going to buy prepaid credit cards online buy from a site that doesn't charge shipping on top of its other fees.

Also make sure you're not going to be charged any hidden fees. A few prepaid credit card companies have been known to charge a fee against the unused balance of the card each month. This means you pay for the card every month even though you're not buying anything.

Also avoid prepaid credit cards that have automatic monthly fees. Instead, look for a prepaid credit card that only charges a fee if the card goes unused for an extended period of time.

High one-time set-up fees are another thing you want to avoid. Companies charge anywhere from $0 to $50 or more. Guess which one you'd be better off using? Go for the cards that do not charge a setup fee, or at least the cards that charge a minimal fee. Fifty bucks is a rip off.