Prepaid credit cards have appeared on the scene as another alternative to normal credit cards. They are alternative fundamentally in that they are not unsecured credit cards. They are therefore not an unsecured loan in the manner that regular cards are. They are actually a kind of debit card. However, they are gaining popularity in particular niches because they are often marketed towards high-school and college students as a way to introduce them to management of credit cards.
Prepaid credit cards are of different types. A popular kind is a variant of prepaid phonecards. They are bought with fixed amounts of credit attached: $25.00, $50.00, $100.00, etc. Cards of lower credit value usually come with relatively higher prices than those of higher value. There are a number of ways to pay for these cards, with credit card payments being the most popular. This type of card is common as a gift card and they often include added features such as bonus points for purchases. This means that some companies have arrangements with merchants so that points are offered only for purchases at particular establishments.
Prepaid credit cards obtained for a youngster, for example, will bear the name of that youngster even if they are not the holder of the account. This allows a parent to be responsible for all the financial aspects of the card account while a child is saved the awkwardness of having to use a parent's credit card.
Thanks to ecommerce technology, a newer, more versatile kind of prepaid card has emerged which looks indistinguishable from a regular VISA or MasterCard. These are reloadable credit cards where an account is created and money can be transferred to this account to add to the amount of credit on a card. So this type of card is a useful tool, for example by which a parent can monitor and regulate a child's spending while training her/him on the finer points of healthy card management. Transferral of funds to the account can usually be done in several ways including by phone, wire transfer and credit card payment. In cases where the issuing company has a website, online payments and account management are usually available.
One drawback with prepaid reloadable cards, as opposed to a secured credit cards, is that they do not allow the user to establish a credit history. They are -in effect- reloadable debit cards. But for an initial card to introduce youngsters to the ways of plastic, it has its uses. Note that although these cards are sometimes marketed to consumers with poor credit history who are unable to obtain unsecured cards, their utility in this regard is limited. They can offer short-term convenience in cases where plastic is required -such as for a car rental- but for those looking to re-establish their credit, they offer nothing that a secured credit card would not. Indeed, this latter alternative is still the best option for subprime consumers attempting to re-establish their credit worthiness.