A Guide to Understanding Prepaid Credit Cards

A Guide to Understanding Prepaid Credit Cards

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A Guide to Understanding Prepaid Credit Cards

What is a Prepaid Credit Cards?

Prepaid Credit Cards are financial instruments defined as ‘secured’ or ‘limited’ in nature. This means that a wide variety of regulations with regard to associated credit limits, interest rates, annual percentage rates (APR), the application process, and scheduled repayments may exist. 

Both individuals in possession of credit ratings classified as ‘low’ or ‘poor’, as well as individuals without any credit history, may become eligible to receive Prepaid Credit Cards.

Individuals undertaking efforts to rebuild individual credit scores or ratings, as well as younger individuals interested in becoming acclimated with the credit card process, may undertake Prepaid Credit Cards. This allows for a low-risk lending endeavor with regard to both the individual in possession of a Prepaid Credit Card, as well as the associated lending institution.

Standards and Practices Typical within Prepaid Credit Cards

Upon applying for a Prepaid Credit Card, both the applicant’s credit score and credit rating will undergo analysis and assessment from the applicable lending institution. The following may be applicable to the approval process of a Prepaid Credit Cards:

Applying for Prepaid Credit Cards

The following stipulations may be applicable to the application process and subsequent approval for the receipt of Prepaid Credit Cards:

Individuals considered to be high-risk with regard to the presumed repayment of outstanding balances, a classification oftentimes rendered as a result of the analysis of credit history, may be required to furnish a deposit prior to the receipt of Prepaid Credit Cards.

The furnishing of such a deposit allows for the alleviation of risk through the provision of collateral. In the event that default occurs with regard to repayment, the deposit is absorbed by the lending institution.

Credit History of the Individual Applying for Prepaid Credit Cards

Individuals in possession of credit scores determined to be ‘poor’ or ‘low’ may not be able to become approved for standard, unsecured credit cards. Furthermore, they may endure more difficult experiences doing so resulting from the analysis of their respective credit history. 

However, the receipt of Prepaid Credit Cards may be both possible and beneficial. Not only will an individual be able to receive a credit card in lieu of credit history determined to be ‘poor’ or ‘low’, but prompt repayment of Credit Cards for Bad Credit will typically result in the improvement of individual credit scores and history.

Secured and Prepaid Credit Cards

Prepaid Credit Cards may require the presence of ‘surety’ formulated with the addition of a third party in addition to borrower and the lender. Surety is defined as a third-party entity responsible for the ultimate repayment of the credit card balance. In certain cases, a surety may also be defined as a ‘guarantor’. In the event of the Principal’s failure to repay the credit card balance, the responsibility of repayment will become that of the Surety. Surety loans allow for heightened insurance with regard to the lender with regard to the reduction of the risk of failure to satisfy outstanding credit card balances. 

Prepaid Credit Cards Assistance

In certain cases, the terms associated with Prepaid Credit Cards may not be ideal for the individual in possession of these types of credit cards, the prompt repayment, responsible usage, and the compliance with the expressed terms of service will typically result in increased credit limits and raised credit scores. 

Individuals interested in applying for credit cards are encouraged to contact legal and financial professionals in order to better understand both the risks and ramifications implicit within any nature of credit cards.


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