Pre-paid Credit Cards vs. Credit Cards


ADVERTISING DISCLOSURE: is an independent, advertising-supported web site. receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » Research » Guides » Cardholder Benefits » Pre-paid Credit Cards vs. Credit Cards

Pre-paid Credit Cards vs. Credit Cards

The content is accurate at the time of publication and is subject to change.
If you don’t have access to a bank account or are tired of being rejected by the major credit card issuers, then you might have thought about opening up a pre-paid credit card. Pre-paid credit cards appeal to consumers with little or no credit, because they promise all the things that a traditional credit card does. Although they are both plastic, they are not the same. What you did not know is that pre-paid credit cards are more trouble and money than they’re worth. Credit cards rack up fees in the form of late payments and interest rates, pre-paid credit cards ask for those fees upfront, whether it is a signing fee, an ATM withdrawal fee, a “loading” fee, or a direct deposit fee. With a pre-paid credit card, there is a fee with just about everything. And if these fees don’t get paid on time, you could have paid your way to the collection agency. Yet, some consumers are convinced that having a prepaid card is better than not having a card at all. Here are some reasons why a credit card might be better than a prepaid card:
  • Money Management. It might seem like a prepaid card is better for money management, but it’s the same. Nothing is stopping you from going to your bank and reloading your card. Don’t forget, every time you reload your card you are contracted to pay the “loading” fee ranging from 99 cents to $6. A prepaid credit card will not help you budget any more than a regular credit card would. It’s all about self-discipline and dedication in order to change your spending habits.
  • Credit Score. Prepaid credit cards cannot improve your credit score. Prepaid cards rely on your own personal funds; you are not doing any borrowing from the bank, and therefore cannot be establishing any credit. This rumor actually came from the prepaid credit issuers themselves, as they claim to report the account information to credit card bureaus. It’s all just advertising.
  • Establish a Bank Relationship. Just because you have bad credit, doesn’t mean that a prepaid credit card is your only option. In fact there are lots of things you can do. A regular debit card will work just fine and will help you begin establishing a pleasant relationship with the bank. Banks don’t do credit checks when signing up for a debit account. Usually all that is required is a minimum deposit, and/or a parent if you are under 18.  And checking accounts are free!
And even if you have atrocious credit there are still options for you to help improve your credit score. The Orchard Bank Card is notably one of the best credit cards out there for people with bad credit. This can be a lifesaver after you’ve been denied by unsecured credit cards. Also, if you get denied for their unsecured credit card, try their secured card, which gives you a balance of credit equal to the amount of money you put down. The initial payment will be given back to you whenever you close the account, in order to pay off your bill. This option allows you to build credit, live within your means, and monitor your spending.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

Autumn 2018: Best Rewards Credit Cards for Thanksgiving Shopping

Autumn 2018: Best Rewards Credit Cards for Thanksgiving Shopping

Posted: November 8, 2018

Thanksgiving is coming, and whether you are hosting a meal or coming as a guest, your spendings are going to accumulate faster than you can notice. A holiday feast is a costly matter – each year Americans spend around $50 on a Thanksgiving ... Continue reading
The Best Credit Card for Earning Cash: Discover it® Cash Back

The Best Credit Card for Earning Cash: Discover it® Cash Back

Posted: November 2, 2018

You’ll have hundreds of dollars in your pocket in no time because you’ll earn money back on every purchase you make with this card. There are no restrictions on the amount of cash back you can get, and Discover even matches every penny you ... Continue reading
Top 5 Cards for Travel from Our Partners: Autumn 2018 – Expert’s Choice

Top 5 Cards for Travel from Our Partners: Autumn 2018 – Expert’s Choice

Posted: October 10, 2018

Nights are drawing out, the wind is colder every day and you already feel the lightest breath of winter on your face - autumn is here. Holidays are over, kids are back to school and all you are left with are hefty holiday bills that you ... Continue reading
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!