Prepaid Credit Card

AAA

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.

INVESTOPEDIA EXPLAINS '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 Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Credit Card Debt

    A type of unsecured liability which is incurred through a short-term ...
  3. Cash Card

    A cash card can be any card that you can insert into an ATM or ...
  4. Credit History

    A record of a consumer's ability to repay debts and demonstrated ...
  5. Credit

    1. A contractual agreement in which a borrower receives something ...
  6. Credit Card

    A card issued by a financial company giving the holder an option ...
Related Articles
  1. Budgeting

    What are the pros and cons of digital gift cards (e-gift cards)?

    Examine the pros and cons of gift cards. Learn about protection in case of loss, monitoring spending by teens and wasted small balances.
  2. Savings

    What transactions cannot be made using prepaid credit cards?

    Find out about the transactions that are restricted when you use a prepaid credit card, and find out about other ways to use a prepaid card.
  3. Credit & Loans

    What fees usually come with prepaid credit cards?

    Choose a prepaid debit card with a fee structure that doesn't eat away at the existing balance by considering how you intend to use it the most.
  4. Credit & Loans

    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 is generally only used once.
  5. Credit & Loans

    Credit, Debit And Charge: Sizing Up The Cards In Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  6. Credit & Loans

    Take Control Of Your Credit Cards

    The plastic in your wallet doesn't have to hurt your finances. Learn how to manage it responsibly.
  7. Credit & Loans

    How Credit Cards Affect Your Credit Rating

    The average American household has four cards, but does that mean more is better?
  8. Credit & Loans

    10 Reasons To Use Your Credit Card

    Charging purchases is not always a no-no. In fact, there are some very sound reasons for choosing this option.
  9. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
  10. Options & Futures

    Prepaid "Credit" Cards: Convenience At A Cost

    These cards offer convenience and security, but are they worth it?

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center