Bad Credit Reports Rise, So Do Prepaid Credit Cards

Armen Hareyan's picture

The current economic slowdown has put many consumers into debt and worsened their credit scores. Naturally the credit report will not look bad either. So how do these people get credit cards? The answer to this question explains the recent rise in popularity of prepaid credit cards.

Prepaid credit cards are becoming more popular for three main reasons. First is the safety. Second is the fact of teaching children to learn to deal with money and debt issues. The third is the bad credit score and report.

There is no question that a growing number of people do a significant part of their shopping online. In fact last year during the holiday shopping season online retailers like Amazon.com did better than fixed location retailer. People have found comfort and ease when doing their shopping online. However, credit card safety and issues like identity protection still are in the forefront of the online shoppers. Thus, introduction of prepaid Credit Cards with a 100 or so dollar limits. The customer does not risk very much. The limit is only about 100 dollars and it's prepaid. These things make it safe.

The second reason of the growth in prepaid credit cards is when parents use it to teach their teenage children how to use money and deal manage debt. Many parents give their teenagers debit cards, but this may not be the best solution. It is better to give your child a prepaid credit card, which has a small limit. They know it's credit, yet it's prepaid. The credit card is prepaid up to a limit and teaches children a proper credit card usage, while limiting too much spending. As teenagers have no credit score and their report may not look good either prepaid credit cards may be a good way to start learning about personal finance.

The third reason are the adult consumers with bad credit report and no credit score. Prepaid cards are an alternative worth considering, because with them you do not have to think about the extra charges for interest. People can be rejected after filling out an application for a credit card because their credit score or the history of their credit report. Yet this may be the opportunity for these people to improve their credit report and build a new history.

Prepaid credit cards are associated with major banking institutions and can be used and accepted in all the places. Once the money is in the account, a prepaid card is issued and can be used in the same way it regular credit cards.

Written by Armen Hareyan

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