Log InJoin 

How To Use A Prepaid Credit Card

How To Use A Prepaid Credit Card

Acquiring a credit card may be difficult for some consumers to due to annual income requirements and credit history checks. That doesn't mean there aren't similar options available which have the same flexibility of a standard credit card with slightly different terms and conditions. One of these options is a prepaid credit card which can be accepted at brick-and-mortar retailers and many online merchants. There are a couple of differences however which are important to understand since it may determine how or where you use a prepaid credit card.

What is a Prepaid Credit Card?

The primary difference between a typical credit card and prepaid credit card is that the latter has an existing dollar amount already applied to the account which is then used to make payments. A prepaid credit card is really a hybrid between a standard credit card and a debit card which is tied to a checking account. Some consumers don't like debit cards because of the risk of overdrawing their checking account. Issues with credit cards range from initially qualifying to high interest rates to over the limit fees which can all be counter productive to their convenience. It's easy enough for most consumers to take $100 in cash to a local retailer and purchase a prepaid credit card.

Prepaid Credit Card Fees

Purchasing a prepaid credit card is easy to do but it does have drawbacks, namely fees, which may be an issue for some consumers. Since prepaid credit card issuers do not make money from interest accruing on an outstanding balance so they often impose different types of fees. One type of fee is associated with loading the prepaid credit card with initial funds using cash or a check. Another type of fee can be incurred each time the prepaid credit card is used to make a purchase. Yet other fees result from monthly maintenance, balance inquiries, account inactivity and basically any other fees they can come up with. Not all prepaid credit cards are created equal so comparison shop and do your research when looking for the best prepaid credit card deals

Using a Prepaid Credit Card

Many online retailers, for obvious reasons, do not accept personal checks or cash as forms of payment. For consumers who are unable to obtain a standard issue credit card, a prepaid credit card can be incredibly convenient. When purchasing a prepaid credit card, read the terms and conditions carefully as there maybe certain limitations on where or how it can be used. Some prepaid credit cards have regional constraints and are tied to specific geographic areas. There are also times where retailers and other organizations may not accept a prepaid credit card as payment. If you plan on using your prepaid credit card to pay bills online, make sure your bank or credit union or other retailer can process these types of transactions. Some prepaid credit cards are also not re-loadable which could lead to additional expenses or complications if an institution ties a credit card number to your account.


Purchasing and using a prepaid credit card can be helpful in a number of situations leading to additional purchasing power. They are not without their problems however and the more educated you are about various prepaid credit card options the better you are able to protect yourself from excessive fees and other limitations.

Image by: ClintJCL