The current recession has affected many households. Many consumers have been affected by the loss of jobs and home foreclosures, and the number of people filing for bankruptcy has also increased. After the credit freeze that the U.S. has experienced over the past couple of years, many people are turning towards prepaid credit and debit cards. Why? Because these cards can be obtained by just about anyone and they are very useful for helping to repair damaged credit. Prepaid cards usually carry the Visa or Mastercard logos and can be used in the same manner as traditional credit cards. How does a prepaid card work? Prepaid cards are like credit cards because they are usually backed by one of the major credit card companies. The difference between a traditional credit card and prepaid card is that the latter is completely controlled by the cardholder. The initial deposit used to open the card becomes the credit limit, and when the user wants more money then he or she can add it to the card. Prepaid cards limit spending since the consumer can only spend the amount of money available on the card. If the person tries to spend more than the limit, the card will be denied. Therefore, prepaid credit cards can be used at most places that traditional cards are accepted and this is a great option for someone that wants to build good credit. Can a prepaid card help me during this recession? Using a prepaid credit card can help you repair a damaged credit history by playing a part in boosting your credit score while positively affecting your credit history. In some ways it offers more advantages. Prepaid cards carry no interest charges and they help build credit because some companies actually report the payments made directly to the credit bureaus. However, card companies charge fees for adding money to prepaid cards and will even charge you for not adding money within a certain amount of time. There may also be limits on how much money you can put on the card and the minimum balance that must be kept in the account. Some prepaid card companies don’t report payments to the credit bureaus so if your goal is to build credit then make sure you apply for a card that does report to the bureaus. How do I get one? Prepaid credit cards are easy to get. You can go online and apply in seconds. Most companies usually charge a small set up fee and deposit, which then becomes the credit limit. Once you receive your card then you can begin using it. If you are ready to improve your credit without the risk of going further into debt, a prepaid credit card may be the option for you.
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