How to Build Credit With a Prepaid Credit Card

A prepaid credit card, also called a secured credit card, is a good option for those who haven't yet established credit or who have poor credit and are trying to rebuild their credit scores. A prepaid credit card requires you to open a savings account with the credit card issuer that ranges from a few hundred to thousands of dollars. The credit card issuer then allows you to access a credit line that's a certain percentage of your deposit amount, which can be between 50 and 100 percent of the total. Secured credit cards can be used to pay for goods and services just like an unsecured credit card.

Instructions

1

Before you apply for a prepaid credit card, ask questions to protect yourself against usurious charges buried in fine print. The Federal Trade Commission urges consumers to ask the issuer about their application and processing fees and if they will be refunded should you be denied the card. Inquire if there's an annual fee and note if the prepaid credit card has an interest rate on the balance that's higher than an average credit card.

2

Make sure that the prepaid credit card issuer reports to a credit bureau if you're trying to establish or rebuild credit. If the issuer doesn't report to a credit bureau, it won't help you build credit because it will not be reflected on your credit history.

3

Make sure to pay the minimum amount on your credit card statements in a timely manner. This is the only way to build or repair your credit history. If you have a good track record with the prepaid credit card issuer, they might convert your account to an unsecured credit card and increase your spending limit.