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LaToya Irby

Can a Prepaid Credit Card Help Your Credit Score?

By September 23, 2012

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Prepaid cards are often pushed as an alternative to real credit cards, especially for people who have bad credit or no credit at all. The truth is, prepaid credit cards aren't really credit cards at all, they just look like them.

Real credit cards are basically a way to access a loan that you've already been approved for. Prepaid credit cards, on the other hand, are more like a plastic version of cash - once you spend your balance, you need more before you can spend more. Find out more about prepaid credit cards.

If you're looking for a way to establish or re-establish your credit, a secured credit card is what you're looking for. You make a deposit in the same way as a prepaid credit card, but your purchases are loaned to you rather than subtracted from the balance of the deposit. Learn how you can rebuild your credit with a secured credit card.

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Comments
November 4, 2010 at 6:16 pm
(1) MyMoneyMess says:

They used to call them “Stored Value” cards, not “Prepaid Credit Cards”. Essentially they’re Visa or MasterCard gift cards. you put a certain amount of money in and then you can use it like a credit card. As you say, they don’t report to the credit bureaus and will not help rebuild credit.

They are very good as alternatives to regular bank accounts for those who cannot obtain a checking account for whatever reason. Some companies offer these kinds of accounts instead of paychecks or direct deposit to their employees who don’t have checking accounts.

For credit rebuilding, I agree – secured cards are the place to start.

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