First of all the question needs to be asked, does using prepaid credit cards build credit?

The answer is yes and no.  Prepaid credit cards are simply cards you use to spend money you already have.  They are exactly like a checking account debit card except without the checking account.

Because of the nature of prepaid cards some of them do not report to the credit bureaus. You do not actually borrow money with prepaid cards like you do with a standard credit card.  You essentially “load” money onto the card, say $200, and you cannot spend more than the amount you placed on the card.

So you may ask, why use prepaid cards at all?

Good question, there are a few reasons including the security.  Prepaid cards are much safer than cash and if you are unable to qualify for a checking account a prepaid card is an excellent alternative.

In some cases they do report to the credit bureaus and help your credit.

Some cards have what is called a credit builder feature.  Even though the credit builder feature typically costs money on a prepaid card, sometimes it is worth the cost to help rebuild your credit.  If you have a history of maxing out credit cards, missing payments or your credit is to low to qualify for any credit cards this could be the best option for you.

Credit cards can be a trap for irresponsible borrowers, but a prepaid credit card is an alternative that eliminates the ability for you to spend money that you do not have. Plus you will not lose money paying the interest on credit cards.

See this example of a prepaid card: You can click the card or Apply Now to get more information on that offer.

Card Description Apply

SilverCard Prepaid MasterCard®
SilverCard Prepaid MasterCard®
  • Perfect for Gov./Benefits Checks recipients
  • $0 activation with rebate*
  • 100% guaranteed approval*/no credit check
  • Free direct deposit of your pay or gov check
  • Anywhere MasterCard Debit card is accepted
  • No overdraft fees or minimum balances
  • Online Checking - Electronic or paper checks

Apply Now!

Better options for building credit.

If a prepaid card is all you can qualify for or feel comfortable with then let that be your option, but there are other choices for building credit even if you have a low credit score.

  • Store Credit Cards – Getting approved for a store credit card, like at department stores or Walmart type stores,  is often times easier than qualifying for a credit card.  This is a good place to start building credit.
  • Entry Level Credit Cards – Companies offer entry level cards that pretty much anyone can qualify for.  (Click here to see a list of these cards).

Whether you are trying to start building credit or rebuild your credit it is important that you do it correctly and wisely.  Good credit will save you thousands of dollars the same way bad credit will cost you thousands of dollars.

If you have any experience, good or bad, with prepaid credit cards please share with us in the comments.