If you are trying to repair your bad credit or raise your credit score, getting a prepaid debit card may be a wise move.

Some people may don’t agree when you know the way to use your prepaid debit card correctly, these special cards may be great tools to rebuild credit.

On this post, let’s talk about how prepaid credit cards can help in fixing credit.

Prepaid Debit Card Features

Prepaid debit cards are similar to electronic wallets. A prepaid card holder must first make a deposit to his/her debit account before when using the card for payment. Purchases are immediately paid while using the available balance within the account. When the balance runs out, the card holder must make a new deposit or reload the account make use of the card for payment.

Although not having a credit line can be major restriction, this particular feature makes prepaid debit cards an ideal choice for those who are having a hard time controlling their credit card spending.  Since you will not be able to charge purchases to your credit, the risk of debt build-up can be avoided.

Furthermore, prepaid cardholders do not need to worry about incurring interest rate charges should they fail to pay back their balance on time.  Since charges are instantly paid using the existing balance in the account, repayment is not necessary.

What about the fees associated with prepaid cards?  It is true that some prepaid debit cards carry a wide variety of fees which can be a burden.  Nevertheless, by doing research and comparing prepaid cards in the market, you should be able to find the one with a minimal set of fees.

There is usually a set-up fee or processing fee required when you apply for a debit card.  Annual fee is also expected but some issuers impose monthly fees as well to keep the account active.  If you have to pay a monthly fee to maintain your prepaid card, see to it that it will not break your budget.

Most prepaid credit cards also impose a fee for every transaction.  You can avoid per transaction fees by planning your purchases ahead.  This way, you only make one trip to the counter and pay only a single transaction fee.  Of course, it’s best to look for a prepaid debit card with the lowest per transaction cost.

Prepaid Debit Cards and Bad Credit

In the past years, prepaid cards do not report to the major credit bureaus but today you can find issuers that offer credit reporting service.  Thus, prepaid debit cards can now be used to establish credit history and improve credit score.

Take note that not all prepaid cards in the market offer credit reporting service so it’s very important that you check this particular feature before making a choice.  Just as you need to spend time reading the Terms and Conditions of a regular credit card, you should do the same when evaluating prepaid debit cards.  Read the fine print and get to know your limits and privileges as a card holder.