Bad Credit Solution: How To Choose Prepaid Credit Cards

Prepaid credit cards can be a solution for those with bad credit because even though they do not provide a good source of funds, most of them report timely payments to credit bureaus which can help those with credit problems to raise credit score and improve credit history. However, it is important to know what makes a prepaid credit card a good deal.

There are a number of things that you need to inquire about to get the best deals on prepaid cards. These include the costs, the benefits, whether they report to credit bureaus or not, if there is any possibility to obtain an unsecured credit card in exchange for the prepaid plastic when the holder's credit score and history improve, etc. All this information is essential to compare offers and decide which one is the best choice.

Costs Of Prepaid Credit Cards

There are many costs that you need to consider with these cards. On this financial product there is no actual financing, yet, the card issuers do make money out of them and that is what fees and costs are all about. Following are some of the things you need to find out by contacting the different issuers and inquiring about the fees and costs:

Some credit card issuers may charge a fee for opening your account. However, most will just waive this fee if you deposit a certain amount of money. Also, beware of those who deduct a certain percentage of each deposit you make on your card. Sometimes this percentage is just too high and turns using these cards too expensive.

Some may charge an annual fee just like some regular line of credit issuers do and others will charge monthly fees. You can easily compare the costs either by dividing the annual fee by twelve or by multiplying the monthly fee by twelve. Though the use of the card should not be charged, there are some issuers that charge a certain amount for purchasing goods or services.

Reporting To Credit Bureaus

It is important to make sure that your prepaid credit card issuer reports regularly to credit bureaus as this is essential to take advantage of the use of this product. If your issuer reports to credit bureaus, then, your timely balance payments will keep getting recorded into your credit report thus improving your credit history and consequently increasing your credit score.

Not all card issuers report to credit bureaus. There are lenders and issuers yet that refuse to provide credit bureaus with that information. Since there are no particular regulations on this issue, you need to make sure that your chosen prepaid card reports to credit bureaus or else, all your efforts will be absolutely in vain.

Future Account Upgrade

It is a good idea to ask the issuer if it is possible, once your credit improves and your credit history shows no stains, to upgrade your prepaid credit card account and get an unsecured credit card in exchange. Though you should not base your decision on this fact, as you can always get another credit card and close this account, it is always better to keep credit records so as to build a long, clean and positive credit history.