Also known as a secured credit card, a prepaid credit card is much like a regular credit card, only the credit limit is generally lower than a regular card and that credit limit is based on a security deposit that the account holder must make in order to use the card. A prepaid credit card is different than a prepaid debit card in much the same way that a regular credit card is different than a regular debit card — a prepaid debit card deducts funds from the amount of money deposited into the account associated with the card whereas a prepaid credit card makes purchases on credit.

Prepaid visa cards account is opened by depositing money into that account, much in the same way you would make a deposit to open a checking or savings account. Once the money has been deposited, the account holder is issued a physical credit card that can be used in the same transactions in which regular credit cards are permitted. Perhaps the best part of the prepaid credit card is that spending cannot go so far as to send the account holder into debt. The purchasing power of that card is limited to the amount of the security paid upfront in order to secure and use the card. Furthermore, because of the security deposit required, bills are unnecessary and interest charges or late fees aren’t possible. In this respect, prepaid credit cards are similar to debit cards linked to a savings or checking account.

Prepaid credit cards typically come with an additional account set-up fee. The amount varies, but typically ranges from about $5 US Dollars (USD) to $10 USD. In addition, additional fees will be imposed each time more cash is deposited into the prepaid credit card account. For those with bad credit, the benefits of a prepaid credit card far outweigh these extra charges. Prepaid credit cards make it possible to make reservations for such things as hotel rooms and pay for things like car rentals all while avoiding the possibility of interest charges.