How Do Prepaid Credit Cards Work?

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Prepaid credit cards are used to rebuild credit. Consumers will deposit money into an account and use that money to spend with the credit card. Learn how credit card companies will eventually allow the consumer to use regular credit cards after a prepaid card with information from a registered financial consultant in this free video on credit cards.

Part of the Video Series: Money Management
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Video Transcript

This is financial adviser Patrick Munro talking about how do prepaid credit cards work. Now prepaid credit cards are a tool used for the purpose of rebuilding credit. Sometimes individuals will encounter credit difficulties and they are no longer able to have a credit based credit cards. So what they do is deposit cash amounts with vendors who are issuing cards and then when they use the credit card they are actually spending down their own cash. The credit card companies monitor this activity when they send out the bill and over a period of time if an individual has paid their prepaid credit card balance down or payments schedule down in a responsible fashion, the credit card company will add money to the account that is of their own nature. That means you now have a true credit card and it's a way overtime to rebuild your credit using prepaid credit cards. This is Patrick Munro financial adviser talking about how do prepaid credit card work.

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