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Do Prepaid Credit Cards Improve Credit Scores?

credit score

With the decline of available credit limits, many of us debtors have turned towards prepaid credit cards. The growth of the business turned the heads of big banks that joined smaller companies with versions of their own. It was a consumer’s push for more that extended available options. As popularity continued to grow, so did the concern that using prepaid credit cards will have no positive effect for those credit challenged folks trying to rebuild a credit score. The consumer must have money upfront to pay for these cards. It isn’t at all like applying for money to borrow from a direct cash advance lender. Both options do help credit challenged folks deal with money matters when credit cards cannot be used. How much help will prepaid cards give its users?

Do prepaid credit card users have any benefits for using the cards? The number one benefit to using a prepaid card is that the owner will have similar purchasing freedoms   provided by credit cards. Shoppers can go online or swipe the cards at most stores that take credit cards. Users may find a few limitations so it is always best to ask ahead if prepaid cards are accepted.

Many prepaid card users would opt use these cards over debit cards for multiple safety reasons. For starters, there are no direct links back to bank account balances. This limits overdrafts since the money comes right off the prepaid card not out of your account. If lost or stolen, the user may potentially lose the remaining balance depending on the company servicing the card. Not like losing that money wouldn’t hurt your finances at all, but it wouldn’t have the long-term effects that could potentially cost you even more. Debit cards do not carry the same protection plan as credit cards and charges made against your bank account may not always be credited back. Credit cards will often have fraud departments to help resolve matters if cards are lost or stolen. Your account will remain protected, but there may be lots of hoops to jump through before it is all said and done.

The upside to obtain one of these cards is that they can be purchased in several convenient locations. Reload the card at any time. Instructions on how to do so will accompany every new card. The downside to prepaid card service is that there are oftentimes applicable activation fees upon purchase. Users will also have to pay an additional fee to reload the card. It is important to understand all fees pertaining to the prepaid credit card before you buy it. Shop for different cards and compare costs. You would do it to find the best cash advance direct lender so why not save even more by purchasing the best prepaid card with the competitive fees right from the start? Ask your bank if they have any prepaid card services for its customers. You may save in the end by working directly with your bank. Just because you have credit challenges, it doesn’t mean you have to pay over-the-top fees for money help.

Prepaid cards will not help to improve credit ratings.

Because a prepaid card owner never ‘applied’ for the card, using one will not affect credit scores whatsoever. Those who apply to creditors have their application go through a credit approval check. This gives creditors the option to deny requests or apply higher interests for poor credit status. Credit cards are borrowed money. Credit utilization rates rank how well debtors manage this borrowed cash. Do they pay it back on time? Do they overuse, underpay or both? This ranking system keeps a watchful eye on debtors. Prepaid cards offer nothing good or bad in terms of money management.

The only way you can help to rebuild your credit is to lower your debt totals and improve on the way you handle debt. A cash advance loan online will not help manage monthly costs nor will it directly help credit status. These loans demand full loan payment plus fees and can sometimes create additional financial troubles. You could omit prepaid cards and instead point the money towards debt payments. The cards do come in handy for emergencies but will not help to directly improve credit scores.

 

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