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What is a Prepaid Credit Card

A Prepaid Credit Card is a credit card which looks exactly like any other credit card, but when you use it you do not borrow money from the lender. Instead, you are using part of your balance, which was prepaid earlier. More and more money lenders are starting to offer prepaid credit cards. Both prepaid Visa and prepaid MasterCard are available.

Why would you need a prepaid credit card?

If you have had credit problems in the past you might not be able to obtain a regular credit card and your only choice might be getting prepaid credit card. In our modern society, having a credit card is a must. Try booking a vacation, car or hotel over the phone or online, without having a credit card and you'll understand what I'm talking about.

How does Prepaid Credit Card work?

The idea behind Prepaid Credit Cards is relatively simple. All you need to do is to open a new prepaid credit card account and deposit some funds in it. You can add more funds to your prepaid credit card account anytime you want. Once you have some money in your account you can start using prepaid card, just as a regular credit card.

Prepaid Credit Card Advantages

1. Prepaid Credit Cards bear no interest rate. When using prepaid Visa or prepaid MasterCard you are using your own cash deposited into the prepaid account prior to the purchase. Because of that, you do not owe any interest on the purchases you make.

2. Prepaid Credit Cards are easy to get. The prepaid credit card application is very simple and doesn't require credit check or income proof.

3. Prepaid credit card means no debt. Because the credit card is prepaid, you do not borrow money when you use it, hence no debt.

4. Prepaid Credit Cards are accepted everywhere the same way the regular credit cards are.

Prepaid Credit Card Disadvantages

1. Prepaid Credit Card means No Credit. If you don't have cash to load your prepaid Visa or MasterCard, then you cannot use it.

2. Prepaid Credit Cards have fees. Most of the Prepaid Credit Cards require a small setup fee. Also when re-loading your prepaid account you have to pay fees again.

Prepaid credit cards are good solution for people who have had credit problems or don't have established credit history yet (think recent immigrants to Canada).