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?
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Helps to tell us where you're located. These prepaid credit cards vary widely by country.– Chris W. ReaCommented Mar 26, 2011 at 3:34
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Belgium, Netherlands– AndraCommented Mar 26, 2011 at 7:19
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4 Answers
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).
answered Mar 26, 2011 at 0:37
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He was talking about online shopping security concerns and traveling, what would that have to do with the secured cards? Besides, secured cards are credit cards in all and any way, it's just a secured credit, vs the unsecured credit of the "ordinary" credit cards, they're not prepaid. Commented Mar 26, 2011 at 4:22
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.
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Indeed, my mistake. It must be the late hour. Post paid is the normal situation. Credit history is not so much an issue here. If you have bad credit history you are flagged as such at a central institute of credit registrations. A cc here is primarily a form of payment. Most people pay their "debt" immediately. I would like to have a prepaid credit card to do online payments. In case my cc details are obtained, I don't risque loosing the maximum allowed credit on my credit card.– AndraCommented Mar 25, 2011 at 22:10
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In retrospect I did not fully understand the question(s). THe last part "what is the most affordable" is not answerable in any case, as it would constantly change. I might suggest another question specific to "should I use a prepaid ... for internet ..."– sdgCommented Mar 25, 2011 at 23:07
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I think you confused Pre-Paid Cards (like the GreenDot) with secured credit cards (like Capital One Secured). The poster was asking about Pre-Paid Cards. These have no impact on the users credit report at all. Commented Apr 21, 2011 at 18:16
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.
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This feature you speak of is a fraud protection feature that isn't related to the question at hand. Commented Apr 21, 2011 at 18:17
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@Frazell - the OP wrote "In these circumstances there are risks involved if your cc details are obtained." I would say that this part of the question is referring directly to fraud protection. The previous sentence was referring to online purchases where this protection is particularly relevant.– uɐɪCommented Apr 26, 2011 at 7:16
What is the problem that you are trying to solve?
In most places, credit cards have fraud protections that limit your liability to fraudulent activity.
I've yet to see a scenario other than preventing the user from spending too much money where pre-paid cards made any sense.
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1In Europe budget airlines make per sector charges when you make bookings using any payment method other than their "preferred" card type. In general this preferred card is the most obscure that they can find, trapping the majority of their customers into paying the fees. For many airlines this is a Visa Electron debit card. Ryanair charge if you use anything other than a prepaid Mastercard. The fees are often higher than the airfare. This is why I use one of these cards.– uɐɪCommented Apr 19, 2011 at 13:17
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@Ian: Interesting fact. Didn't knew about this practise engaged by Airlines. Seems very innovative :)– DheerCommented Apr 21, 2011 at 13:03
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There is a case going through the UK courts, brought by The Consumer's Association (they publish Which? magazine) that is attempting to outlaw this practice.– uɐɪCommented Apr 26, 2011 at 7:18