Are prepaid Credit Cards a good way to begin to establish credit?

Question

My friend has almost no credit history and was wondering where to begin.

Answer 1

One excellent way to build a credit is, to go to a bank you have business with and open a savings account, then deposit 500 dollars. Have the bank LOCK the account, and issue you a credit card with a credit limit of 500 dollars. Many bank will be happy to do this for people with no credit.

Keep in mind, until they UNLOCK the account, or cancel the credit card, you cannot withdraw the money. This is their security deposit in case you don't make the payment.

Make a payment every month, in full, without fail, and you will soon establish credit. BE SURE TO NOT CARRY ANY BALANCE! It won't affect your credit, but it's best not to start a bad habbit.

Of course, if you do default on payment, it will affect your credit. Be sure your friend is aware, he is on training wheel with bank closely watching the activity.

This is different from pre-paid credit card. This is a true credit card. Pre-paid cards are nothing more than a gift card or a debit card. You do not build up your credit history that way.

Answer 2

actually yes,, they are called secured credit cards and have a maximum spending limit,, they are funded by your bank account,, so if you dont have the money,, you wont get the transaction,,, it helps to limit your spending and to avoid overages and late fees and the high interest that comes w. those big market, markup credit cards,,, its the best way to start,, then after you have established the credit,, get a small interest, limit card,,w/ like $500 or so use only for things like a car rental backup or for gas , or parts,, and always pay back before the due date,, and make sure you pay the full amount ,,, dont spend what you cant afford, promptness is key this will help you build a positive credit portfolio you can build on

Answer 3

It might not be a great way, but if you have very little credit history, it might be your only way. I know of someone with over $200K in the bank that had to do the same thing. Be careful with credit - it can really cause financial trouble for you, so if you do this, proceed with extreme caution.

Answer 4

yep. that could be a good starting point. many credit card companies will give credit to people with no credit history though. unless the credit is bad a person could start with a 'real' credit card.

Answer 5

Mastercard do one that you can 'topup' at the Post Office - and if you keep using it, I can't imagine they won't like you for it - and it may well help you to get a proper credit card later on - this is something I've been looking into recently - and the good thing is - you can't get yourself into debt - can you ?

You are probably better off carrying on using them - instead of trying to upgrade and get yourself into debt again or futher in debt if you still owe money, which I suspect you do - or you wouldn't be asking about one - would you ?

Answer 6

No... but his cell phone will help him start building credit...he just must ensure to pay ALL of his bills ON TIME on a REGULAR BASIS for an extended period of time...

It takes much LESS time to get BAD credit than it does to build up good credit!

Answer 7

Yes. After six months of usage and making good payments you can ask to apply for a regular/unsecured credit card.

Answer 8

Pre paid does not establish credit... Tell him to try department stores like sears target or other stores like that or buy a cheap car

Answer 9

Try Orchard Bank's website

Answer 10

no,....the best way is get one from a credit union...join a Credit Union....

http://www.bankrate.com/brm/rate/cc_home.asp

study this website real good, and then make a decision....