Building Credit With Credit Cards

Prepaid card accounts are starting to become more and more known mostly due to the stigma of bad credit being removed from the credit report. People have found that prepaid cards are a way to keep an eye on purchases and keep to a household budget. In an interview with the Gaston Gazette in North Carolina, Kirsten Trusko, President and Executive Director of the Network Branded Prepaid Card Association provided insight into the prepaid card. She begins by defining what a prepaid card is. It looks like and functions the same as a traditional charge card account. However, unlike the traditional card where the cardholder spends first and pays later, the customer front loads the prepaid card account with a set amount. Even though prepaid charge card accounts have the word credit in the name, in all actuality, they absolutely do not have a credit line. The amount of credit the cardholder is able to spend depends solely on the amount of money he has deposited into the card account. There is no threat of exceeding the limit and therefore, no threat of over the limit penalties. There are a good number of reasons why cardholder would use a prepaid charge card account. Some employers will issue them as a way to obtain paychecks to employee without a financial institution account. Cardholders, who shop frequently on the internet, use prepaid cards for added protection against identity theft. Since the cards are not associated with any card company, they would be worthless to an identity thief. Prepaid cards are an excellent way for parents to give their teens allowance. It's also a great way to teach your children how to budget their money and monitor purchases. Seniors love to use prepaid cards because it helps to keep them on track with their budgets especially for those living on a limited income. Because there are no overdraft fees or outstanding debt accumulation, families love these cards to help them budget properly and make easy purchases for food, gas, and clothing. Prepaid charge card accounts do have some drawbacks. Most lenders have added new fees to capture lost revenue resulting from new credit card account reform legislation that will soon become effective. New fees have also been imposed on prepaid cards including activation fees, monthly maintenance fees, declined transaction fees, Automatic Teller Machine (ATM) fees, balance inquiry fees, customer service, and inactivity fees. Activation fees run from $9.95 to $99.95 and monthly maintenance fees can run you from $2.95 to $9.95. Some prepaid card account lenders will waive the monthly fee if you do a direct deposit. Withdrawals fees can also cost you from $1.50 to $2.50. Although most prepaid card issuers do not charge for customer service calls, there are a few who do; the Millennium Advantage card chargers $1 per minute and the Espree card charges $3 per call. A few have a limited number of free calls before you begin incurring charges. Contrary to what most people think, some prepaid charge card accounts can affect your credit report. There are some lenders who report prepaid card activities to one or all three of the credit reporting bureaus. When obtaining a prepaid card, you should check with the lender as to whether or not they report. If they do, like traditional cards, you should stick to the rule of thumb that you shouldn't tie up more than 30 percent of the available balance. If you are interested in paying for a recurring bill each month and would like it automatically deducted from your prepaid charge card account, you may have some difficulty. Again you'll want to check with the merchant because many of them do not accept prepaid cards for this purpose. Nevertheless, if you are working on fixing a bad credit history, prepaid cards is a great way to prove you can manage finances. They also allow you to reserve hotel rooms and rental cars when needed. If you're interested in obtaining a prepaid card, take time to check out all your options. Nearly every lender offers a prepaid card product. If you need a charge card go to JemCreditCards.com, they have the best credit cards, I recommend Discover Card.