Do Prepaid Credit Cards Affect a Credit Score?

If you’re using branded prepaid credit cards, then you’ve got some consumer protections like everyone else against fraudulent purchases. Cards that are stolen or lost and then used by someone else might even be covered by a zero liability policy. That makes them a tempting proposition… but hold on. Because these cards aren’t a form of credit, there is no effect whatsoever to a person’s credit score when they are used. That can benefit some users, but may not benefit others.

What are some other things to consider with prepaid credit cards?

There are always ways to avoid the fees that come with prepaid credit cards. Almost every prepaid card has a way to get all of the money that you have placed onto the card off of it for nothing or almost nothing. What brings about fees are the certain conveniences that people like to have. If you go to an ATM that’s not in your network every day, that will get expensive. The same is true if you have fees to pay bills automatically from your card. Sometimes a little work can pay off with an almost zero fee experience.

Prepaid credit cards make traveling a lot easier. Traveler’s checks aren’t as popular as they used to be, and that’s probably a good thing. It was hard to find a retailer or restaurant that would cash a large check when you needed to buy dinner! Prepaid credit cards operate in the same fashion, but you can pay for the exact amount of the transaction instead of having to give someone $100 for a $5 burger. If your card gets stolen, just like the traveler’s checks that came before them, you’ll have some measure of protection too.

It is easy to track purchases. If you’re a parent who has a child away at college, then prepaid credit cards are a great way to check spending habits. This can then become a teachable moment and sometimes a few extra fees are worth the chance to have those moments.

It’s a lot cheaper to issue prepaid debit cards than it is to issue checks. If you receive any sort of government benefit, then there’s a good chance that you’ve already got a prepaid credit card. Once issued, the benefits can simply be loaded onto the card on the expected date. That’s nice to know because there aren’t any risks of a check getting lost in the mail and waiting in line at the bank to cash a check becomes a thing of the past.

There is no credit check involved at all. It’s your money that is going onto a prepaid credit card. It’s the ultimate in secured funding because all you’re doing is using your money in a secure way without a credit line. When you’ve got bad credit, it can be hard to shop online. This is even more true if you don’t have a bank account either! That means prepaid credit cards give you extra flexibility with your money, even if they don’t help to improve your credit history at all.

 

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