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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.