Prepaid credit cards are a good precursor to regular, unsecured credit cards.
What good are prepaid credit cards? They can actually do a lot of good!
Using a prepaid card is similar to using a debit card. When you apply for a prepaid card, you send in the amount of money you want on the card. You want a $1,000 limit? You send in $1,000 with your application. Of course, there's usually a fee to set up a prepaid card, but there's no annual fee, no late fees and no over-the-limit fees. Contrary to popular belief, the only stigma associated with prepaid credit cards is the one you put on yourself. Prepaid credit cards (also known as secured credit cards) are not labeled as such, and they aren't just for people with bad credit. They look like any other ordinary MasterCard or Visa credit cards. Some people have perfectly good credit and want to keep it that way, so they choose to go with prepaid credit cards instead of regular credit cards. And some people simply don't trust themselves to be careful with regular credit cards so they get prepaid credit cards first as sort of "practice."
Speaking of practice, prepaid cards are excellent for college students. You'd rather have your student learn how to use credit this way than the way most students do it--by getting one of the student credit cards offered on campus and going crazy with it. With a prepaid card, when the money runs out, your card is declined if there's not enough left to make a purchase. Most students will do anything to avoid this kind of embarrassment, so they will keep track of what their balance is and be careful with how they use the card. And since (or they) control the amount that's on the card, there's less of a chance of a student charging more than what he or she can afford. And when the funds run low, you or the student can reload the card. There's a small fee, but it's not as much as it was to set it up in the first place.
If you think prepaid cards are a good way for you to go, apply for one today!
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