Prepaid credit cards
Prepaid credit cards can prove useful for people who are either unable or unwilling to use their conventional counterparts, meaning that they merit consideration.
What Are Prepaid Credit Cards?
Prepaid credit cards can refer to two similar but not quite the same financial products. First, there are people who use the term for prepaid cards issued by Visa and other financial services providers, which can fulfill some of the same functions but cannot be considered the same kind of financial product. Second, there are people who use the term for secured credit cards, which are a particular kind of credit card that tend to see use by people who have either no credit scores or low credit scores. Based on this, it should come as no surprise to learn that the people who use these two kinds of financial products have separate intentions in mind.
Why Would You Use a Prepaid Credit Card?
First, people can choose to use prepaid cards for a number of reasons. For example, prepaid cards are a convenient method of making payments, which is something that it shares with credit cards. Furthermore, prepaid cards are secure, both because they have protections built into them and because they contain a limited amount of money that can be topped up as needed. As a result, prepaid cards are an excellent tool under certain circumstances, with an excellent example being giving children their allowance in lieu of cash.
Second, people tend to use secured credit cards because they have either no credit score or a bad credit score. Simply put, credit card issuers won’t issue credit cards to interested individuals unless they are confident that they can make a profit on them. If someone has no credit score, credit card issuers are going to be very reluctant because they don’t have an easy way to gauge said individual’s creditworthiness. Meanwhile, if someone has a bad credit score, credit card issuers are going to be event more reluctant because higher risk means a lower expected outcome for them. With that said, there are ways to mitigate this problem, as shown by the concept of collateral.
In short, a secured credit card is much the same as a secured loan. However, where a secured loan might be secured using a wide range of assets, a secured credit card tends to be secured using a sum of money. This collateral improves the credit card issuer’s expected outcome by minimizing their loss in the case of a default, thus making it willing to lend to interested individuals even if they have either no credit score or a bad credit score.
With that said, such individuals benefit as well because secured credit cards can provide them with the same functions as other credit cards. On top of this, the use of a secured credit card will be reported to the credit bureaus, meaning that it is useful for either building up a credit score or improving on a current credit score. As a result, it is not uncommon for people to use a secured credit card as a stepping stone to something better, though it is important to not that this is a process that can take months and months.
How Can Bonsai Finance Help You Find the Right Prepaid Credit Card?
If you are interested in a prepaid credit card, you need to choose one with the right features as well as the right lending conditions. Fortunately, if you are not sure where you should start looking, you can count on Bonsai Finance for the expertise and experience that you need to make the right decision for you. After all, our services can look through the numerous prepaid credit cards that can be found out there, thus maximizing your chances of finding something that is well-suited for your needs. Better still, our advice can even help you figure out what you need.