What Is a Prepaid Loadable Charge Card?
- A charge card is a type of credit card that you must pay off in full each month. They don't typically have a maximum credit limit, meaning you can charge as much to the card as you want. These cards also don't have an interest rate or minimum payment option, which works in your favor as long as you manage your money so that you can pay your card off in full every month. If you're unable to pay your charge card in full, you may be charged a fee.
- If you have a prepaid credit card (also called loadable or reloadable), this means that you must put money into the account before you can use the card. The amount of money you put in is usually your credit limit, meaning if you deposit $500, you may spend up to $500. However, if you reload money regularly into your account, some lenders will increase your credit limit without requiring you to add additional money.
- If your credit score is in the upper 700s or 800s, you may qualify for a charge card. These cards are useful for making expensive purchases before you have cash to pay for them. If your credit score is at the other end of the spectrum (lower than 600, for example) you can rebuild your credit with a prepaid or reloadable card. When shopping for a this type of card, be careful: some charge hefty monthly fees or don't report to any credit bureaus. Because you are probably working toward building your credit, it is best to obtain a card with few fees that reports to the three main credit bureaus (Equifax, TransUnion and Experian).
- The way you use your charge card will affect your credit report. If you make a late payment or don't pay your charge card in full each month, your credit score will go down. However, because your credit score depends on how much debt you have in relation to credit, your charge card won't improve your credit score because you have no credit limit. Prepaid and reloadable cards, however, can greatly improve your credit score if you use them responsibly.
