What Is a Prepaid Loadable Charge Card?

by Gregory Hamel
You can shop online with prepaid cards.

You can shop online with prepaid cards.

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The ability to pay for purchases with a card is essential in the modern economy because you don't always have the option of using cash. Many types of transactions, from reserving hotels and shopping online to paying for gas at the pump, require you to pay with plastic. A prepaid loadable or reloadable card is an alternative to normal credit cards and debit cards that you can use even if you have poor credit.

Prepaid Card Basics

A prepaid reloadable card, also known as a prepaid debit card, is essentially a souped-up gift card. When you get a prepaid card, you have to load cash onto the card in advance and then you can use it like a normal debit card to make purchases up to the preloaded balance. If you try to make a purchase that is greater than the amount you have loaded onto a card, the transaction will be declined unless your card has overdraft protection.

Benefits

The main benefit of a prepaid reloadable card is that you can get one even if you have poor credit. If you have a spotty financial history, you might have difficulty getting a credit card or even finding a bank that will give you a checking account with a debit card. All you need to use a prepaid card is cash that you can load onto it. In addition, a prepaid card doesn't allow you to take on debt like a credit card, so you won't end up owing interest.

Drawbacks

Prepaid cards can come with a variety of fees that can make them more expensive than normal debit cards. ,Prepaid cards can charge fees for activation, ATM use, declined transactions, inactivity, reloading funds and getting paper statement. Another drawback is that reloadable cards might not offer the same consumer protections as credit cards, so you might not be able to get your money back in the case of fraud or theft.

Credit Impact

Prepaid debit cards don't involve borrowing, so they have no influence on your credit score. The fact that the card won't affect your credit can be both a good thing and a bad thing. On one hand, use of a prepaid card won't damage your credit, but on the other the hand, it won't help you improve your credit score either.

About the Author

Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.

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