Prepaid Credit Card

DEFINITION of 'Prepaid Credit Card'

A card issued by a financial institution that is preloaded with funds and is used like a normal credit card. A prepaid credit card works in the opposite way of a normal credit card, because instead of buying something with borrowed funds (through credit), you buy things with funds that have already been paid. This card functions like a gift card.

BREAKING DOWN 'Prepaid Credit Card'

A prepaid credit card allows a person the convenience of a credit card without going into debt. You can use them to purchase items online or in person, but since you must load them with funds before using them, you never spend more money than you have. These can be effective tools to teach kids about credit cards without allowing them to irresponsibly rack up charges that they can't afford, or for those that have a hard time managing their finances and end up with tremendous amounts of credit card debt.

RELATED TERMS
  1. Credit Card

    A card issued by a financial company giving the holder an option ...
  2. Prepaid Cards Processor

    A company that processes transactions for prepaid payment cards. ...
  3. Secured Credit Card

    A type of credit card that is backed by a savings account used ...
  4. Credit Card Funding

    The ability to electronically fund a new account, business, or ...
  5. Credit Card Authorization Key

    A code used in credit card transaction authorizations that confirms ...
  6. Credit Card Encryption

    Security measures used to reduce the likelihood of a credit or ...
Related Articles
  1. Credit & Loans

    How To Get A Credit Card Despite Bad Credit

    Prepaid credit cards and secured credit cards are both excellent options for getting a credit card despite having a poor credit rating.
  2. Credit & Loans

    3 New Types Of Credit Cards To Look For

    These three types of credit cards are becoming popular with customers looking to pay less fees and build up their credit scores.
  3. Entrepreneurship

    The Pros And Cons Of Small Business Credit Cards

    Business owners have many financial tools at their disposal. Should a credit card be one of them?
  4. Mutual Funds & ETFs

    Investing In Credit Card Companies

    This investment requires keeping an eye on consumer indexes and the overall health of the economy.
  5. Personal Finance

    How To Find The Right Prepaid Debit Card

    Prepaid debit cards are becoming increasingly popular. Here are some tips for choosing the right prepaid debit card.
  6. Credit & Loans

    What Happens When Your Credit Card Expires

    You can take advantage of this process to learn about other cards that may better suit your needs.
  7. Credit & Loans

    Should You Use Credit Cards To Fund Your Business?

    We give you 4 reasons to consider using a credit card instead of a business loan to fund your business, and how to be smart about it.
  8. Credit & Loans

    Best Credit Cards For People With Poor Credit Scores

    There are still ways you can build credit with a credit card, even if you have bad credit.
  9. Credit & Loans

    Credit And Debt Management: Credit Cards

    by Cathy ParetoCredit cards offer a convenient way to purchase things without the hassle of carrying cash. Used wisely, they're a great way to defer payment on purchases for roughly a month. ...
  10. Credit & Loans

    Credit Cards: What Are Credit Cards?

    By Brigitte Yuille Think of credit as borrowed money. This money is made available to you, but it must be repaid within an agreed amount of time. Credit cards provide a line of revolving credit. ...
RELATED FAQS
  1. What is the difference between a prepaid credit card and a gift card?

    Although prepaid and gift cards are used in the same manner, a prepaid credit card can be used repeatedly, while a gift card ... Read Answer >>
  2. How do secured credit cards help me build my credit score?

    Find out how secured credit cards function and why they can be very useful for those looking to build or rebuild their credit ... Read Answer >>
  3. Why should I register a prepaid credit card?

    Explore reasons why registering a prepaid credit card is a good idea. Learn about protection if the card is lost or stolen ... Read Answer >>
  4. How do prepaid debit cards work?

    Learn about how prepaid debit cards work, including where they are accepted and how the financial part works like a checking ... Read Answer >>
  5. When should I use a credit card?

    I am currently taking a personal finance class and my teacher continually tells us not to use credit cards for everyday purchases, ... Read Answer >>
  6. What are the differences between debit cards and credit cards?

    Learn how the major difference between a debit card and a credit card is where the money comes from when a customer makes ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center