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Before using a prepaid credit card you have to pay for it, thus the self-explanatory identification on the card.A deposit or prepaid specific amount of money which is sometimes called a “security deposit” will be have to be placed by the card aplicant into the bank of the card issuer.In most cases the required amount is between $200 and $500.00 and your credit limit is equal to the amount of your security deposit.

With traditional credit cards, you apply for credit and receive approval or you are denied based on your credit rating, then if approved, you are issued a credit card with a specified line of credit.If you do not have credit established or if you have damaged credit the traditional banks will probably deny you access to a line of credit.

Those lending institutions who issue prepaid credit cards may not bother to do a credit check or verify your employment, as they may eliminate the strict credit rating requirements usually enforced by the traditional credit card issuers.Since your line of credit is secured by the deposited security amount, the credit card issuer is covered in case you default on the payments.The prepaid credit card can help establish credit or repair bad credit because the security deposit assures the card issuer of payment and most people are eligible.Although you may get instant approval on these prepaid credit cards, there could be restrictions, such as having to be at least 18 or 21 years old or you may have to be a citizen of the U.S..

You can conveniently use prepaid credit cards like traditional cards, where ever MasterCard or Visa is accepted.These prepaid credit cards can be used to pay bills online or on the phone or to access cash from an ATM machine for any purpose or they can be used to do online and offline shopping.

Prepaid credit cards can help establish or rebuild reasonable credit ratings and keep payments from falling into default.Other advantages of the prepaid credit cards are the elimination of the need to write checks and money orders and make trips to the post office to pay monthly bills, and your paycheck could be deposited directly onto your card.

Some things that are disadvantages of the prepaid credit card are higher interest rates and over the limit fees, and a monthly maintenance fee.Some other disadvantages of prepaid credit cards are the fact that the cards may not be accepted as payment by car rental agencies and the security deposit which has to be paid before you can use the card.

Whether you are rebuilding your credit rating or establishing credit for the first time, it is very important for you to make your payments on time and you must be careful to not exceed your credit line limit.Prepaid credit cards were added our list of financial sources to help us learn to keep track of where our money is going and how we can control what we are spending.

If for some reason we allow our payments to fall behind for a couple of months, we can easily be caught in a never ending cycle of late payment fees and they can really add up very fast.By making on time payments consistently, you may find that most companies will increase your credit limit and/or return your deposit with interest.

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