I recently came across the concept of prepaid credit cards. Although the name is nonsensical (there is no credit if it is prepaid), I find it quite interesting, since Credit Cards are a necessity in online purchases and traveling abroad. In these circumstances there are risks involved if your cc details are obtained. Any experiences with prepaid credit cards and what would be the most affordable prepaid credit card?
Prepaid cards are not credit cards, they're debit cards (in a sense that there's no credit given to the holder, but rather an immediate debit from the holder's account). From the merchant point of view they're the same, unless the debit card is used as ATM card (which is a different kind of transaction).
The best debit card would be a debit card tied to your bank account. But that leaves you vulnerable in case of fraud (debited amounts are only returned after the investigation is through, whereas with credit cards - you only need to pay after the investigation is through and no fraud found, exactly the opposite).
Debit cards that you can buy in store ("Pre-paid" cards) are basically standard debit cards with account "hidden" from you, much higher fees, and usually without ATM service (i.e.: You cannot get the cash back, only use it for purchases). The fees on these cards range anywhere from 5% to 105% (when you put money on the card, pay for it, and loose all the money in "inactive" fees).
Many credit card issuers provide one-time code for internet purchases, which would be a better option if you're worried about on-line fraud.
For travelers - companies like Travelex provide pre-paid debit cards in various currencies, with ATM access, and fees which are reasonable (for Travelex the inactivity fee kicks in after a year of inactivity).
In North America these are generally referred to pre-paid cards. Quite the difference in terminology. :-)
They are primarily useful to help (re)build credit history for those with out any or with bad history.
Because the initial deposit is treated like a zero from the card perspective, when you so-called pay it off back to the initial deposit amount, this generates a good credit report that you pay your bill on time.
I cannot think of other good reasons to have cash tied up in this way.
A number of banks and credit card companies issue single use "credit card" numbers. These are very good for online purcases as they appear to the merchant as a standard master/visa card but with the security advantage that once you have used the number it cannot be used by anyone else. Citi is one bank that reportedly offers this service but you will have to research for your own country. Unfortunately these facilities tend to be made available country by country.
I believe that you can do the same thing through paypal.