What is a Prepaid Credit Card?

A prepaid credit card is a small plastic card, similar in appearance to a traditional credit card, which has been preloaded with a certain amount of money. Some prepaid credit cards are purchased for set amounts, while other credit cards can be purchased for an open amount.

These types of credit cards are available in several options. A teen credit card is one in which parents assign a certain amount of money to the card and the teenager then uses the card to purchase items as needed. Travelers can purchase travel credit cards much like they would traveler’s checks. Gift cards, which are available through many merchants, can be purchased and used to give as gifts or for personal use. Some companies are using payroll credit cards rather than issuing a check to employees at the end of each pay period.

Two types of prepaid credit cards exist: closed and open. A closed credit card is sold and used by a single merchant, such as Starbucks, for a certain amount, such as $25.00. An open credit card work at almost any merchant and, unlike semi-open cards, allow the consumer to use the card at an ATM machine.

Most of these types of credit cards are also re-loadable. This means that once the card has been spent down to a zero balance, the consumer can return to the merchant or bank and reload with another amount.

The range of options available with credit cards, and the control a consumer has over spending, make using a prepaid credit card an excellent choice for consumers who are looking for an option to the traditional credit card or cash.