Help With Prepaid Credit Card Issues

Prepaid credit cards look like credit cards and share some of the same characteristics as credit cards -- but they are not credit cards. A prepaid credit card is a debit card and cannot provide all the features of a full-featured credit card such as a bank-issued MasterCard or Visa.

Credit Lines

The biggest difference between a prepaid credit card and a traditional credit card is the credit line. Prepaid credit cards do not offer a credit line, while true credit cards feature credit lines ranging from a few hundred dollars to more than $10,000. Prepaid credit cards are usually tied to cash available in checking accounts, although some are not tied to bank accounts. Prepaid cards not tied to bank accounts are accessed for deposits through ATMs and other ways, including deposits made in some retail stores such as check-cashing outlets.

Travel Issues

Prepaid credit cards sometimes pose problems when used for traveling. Hotels and rental car companies often require deposits upon check-in or when picking up the vehicle. The deposits could each total several hundred dollars for a week. This generally is not a problem for people who have credit cards with lots of available credit. However, this is often challenging for prepaid credit card users traveling on a budget with limited money in their prepaid accounts. Some people with prepaid credit cards figure the card allows them to check into a hotel or rent a car, with payment due at the end of the trip. In some instances the amount held can exceed the cost of the rental car or the hotel room, with balances not refunded until more than a week after the trip. Contact the rental car agency or hotel well in advance of the trip to ask specific questions about paying with debit cards.

Credit Repair

The absence of a credit line means prepaid credit cards are not useful for rebuilding or establishing credit. People looking for a credit card for this purpose should ask if the card reports each month to the major credit bureaus such as Experian, Equifax and TransUnion. If the answer is yes then the card is a full-featured bank card good for rebuilding credit. This test is also the easiest way to distinguish a debit card from a full-featured bank credit card.

Availability

Prepaid credit cards are available through retail stores and online. Banks and credit unions usually do not offer prepaid credit cards because they compete with standard debit cards. Fees for prepaid credit cards vary widely, sometimes making them more expensive than regular debit cards. People shopping for prepaid credit cards should compare rates and fees before making a purchase.