Today we have a guest post from Anthony of AccountNow. Money 411 is a personal finance blog provided free from AccountNow prepaid visa card. To read more, visit AccountNow at www.accountnow.com.
Due to the recent economic downturn, many consumers have unfortunately found themselves in situations that have caused them to earn a low credit score and resorting to things such as payday loans. Additionally, because so many consumers have found themselves with debts that they are unable to pay, many lenders are refusing to give credit cards or other loans to those with a limited credit history. Fortunately, it is possible to build credit and improve a poor financial situation through the use of a prepaid visa card.
A prepaid visa card helps to build credit in a few different ways. One way that it helps a consumer’s credit score is by keeping an open account that is in good standing, which will be taken into consideration when evaluating credit. The major credit bureaus take into account the number of revolving debts and open accounts, as well as the number of those accounts that are in good standing, when evaluating a person’s credit. Simply keeping a prepaid credit card account open will help to slowly raise a consumer’s credit score.
Card holders will continue to earn a higher credit score the longer that they pay all necessary fees and balances that they owe. It is also advisable to constantly keep money on the card and not immediately spend the card’s balance. This shows the credit bureaus that a consumer is practicing financial responsibility and trying to improve their credit. However, it is important that a card holder does not fail to pay a monthly or additional fee, as this will lower their credit score. Consumers that continue to use their card responsibly will not only be able to improve their credit score, but may be able to qualify for a regular credit card and build a stronger credit history.
loading...
{ 5 comments… read them below or add one }
Very informative blog posting. I am guessing prepaid credit cards are the way of the future. In a sense though they really aren’t credit cards anymore. Its more of just a debt card.
How much of an impact would a prepaid credit card have on your credit score?
Great points. Also, as the economy tightens, banks are really cracking down on giving people any type of credit (including the fact that it is harder to get credit cards). Some experts have suggested that we are moving closer and closer to a cash economy. With this in mind, and also as a way to get a better grip on our finances, my husband and I have started using cash for almost everything. We have found we think twice before spending something when we are using cash as opposed to a debit or credit card.
@Jenna
Prepaid credit cards help build your credit history. It is much different than pulling out a credit card and paying it off to build credit, but then again, most people using prepaid credit cards don’t even have the luxury of getting a credit card anyway.
The problem with having bad credit, is, other than paying it off, there really are not easy ways of getting back on track.
We suggest using prepaid credit cards to 1) Get use to using plastic payment without the potential of overdraft fees and interests associated with debit/credit cards. 2) show your payment responsibility by paying bills and borrowing money (responsibly) so that credit companies can see that you are improving your payment habits.
Apart from helping in building credit, prepaid credit cards have some other benefits such as interest rates being in excess of 15%, no credit limit as the customer loads their own personal cash onto the card and personal debt is no longer an issue.
{ 1 trackback }