Can A Reloadable Prepaid Card Impact My Credit?

A reloadable prepaid card has cash preloaded on it. It is not a debit card, gift card or credit card.

How do they differ? A debit card is connected to your checking account. A gift card is for a particular amount and usually for a particular merchant; it is not reloadable. A credit card allows you to buy now and pay later for the purchase and it is included on your credit report. A reloadable card is money loaded on a card, it is considered cash, and can be used anywhere.  The card does not have to be thrown away and can be reloaded again. Many reloadable prepaid cards are affiliated with MasterCard, Visa or American Express. They are meant for long term use and for those who don’t have bank accounts or credit cards, especially high school and college students.

Sign up

To set up a prepaid card, you are required to provide name, address, phone, birth date, and Social Security number. If you are loading the card from a bank account, you have to provide bank account information.  You are not required to have good credit or positive bank history to use a prepaid card, but your identity is verified. Since it isn’t a credit card, it is not reported on your credit report and doesn’t help you build credit. It can’t hurt your credit either.

Fees

You may be charged many different fees for using a reloadable prepaid card such as activation fee, monthly or annual fees, reloading fees, ATM fees, fees to make a purchase, over limit fees, balance inquiry fees, and fees for a statement or other account information. It is important to read the fine print before signing up for one.

There is no consumer protection by law for lost or stolen cards, fee disclosure or the investigation process, compared to debit and credit cards.  MasterCard, Visa and American Express offer some protection voluntarily.  MasterCard products have $0 liability for loss due to theft or fraud.  Green Dot prepaid cards through Visa or MasterCard offer $0 liability for unauthorized action and charge $4.95 for replacement cards.  American Express replaces funds lost due to theft or fraud for free and doesn’t charge for the replacement card.

Reloadable prepaid cards are an option for those that don’t have a checking account or credit card.  The key things to consider in using them are the fees and consumer protection. Read the fine print.

Credit Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Leave a Reply