Prepaid credit cards, also known as prepaid debit cards, are a handy tool for managing money and online transactions. They work much like a regular credit or debit card, but rather than being connected to a bank account, they’re loaded with a set amount of money when purchased.
The irony of buying a prepaid credit card with a credit card isn’t lost on many. It might seem counterintuitive, but it can make sense in some situations. For instance, you might want to give a gift or set a strict budget for yourself, or you might need to make a purchase where only a debit card is accepted.
Here is a step-by-step guide on how to buy a prepaid credit card using a credit card:
Select the Right Prepaid Card: There are countless prepaid cards available on the market, offered by various financial institutions, each with its own set of features and fees. The primary types of prepaid cards include open-loop cards (like those with Visa, MasterCard, or American Express logos, which can be used anywhere these cards are accepted), closed-loop cards (that can be used at specific locations), and reloadable cards (that can be topped up). Based on your requirements, choose the most suitable prepaid card.
Understand the Costs: Prepaid cards often come with fees that can include activation fees, monthly fees, transaction fees, ATM withdrawal fees, and reloading fees. Make sure you understand these costs before making a purchase. While buying a prepaid card with a credit card, remember that some credit card companies classify such transactions as cash advances, which typically come with higher interest rates and additional fees.
Decide on the Amount: Determine how much money you want to load onto the prepaid card. This can be based on your budget or the amount you want to gift someone. Remember, prepaid cards do not offer the same protection against fraud or theft as regular credit or debit cards, so it’s not advisable to load large amounts of money onto a single card.
Buying the Prepaid Card: Once you have decided on the type of card and amount, it’s time to make the purchase. This can be done online or at a physical store. Some of the popular vendors include Walmart, Target, and Walgreens. You can also buy prepaid cards directly from credit card companies like Visa or American Express, or from online payment giants like PayPal. Simply go to the store, select the card of your choice, and when it’s time to pay, use your credit card.
Activating the Card: After you purchase the card, you usually need to activate it. Activation can often be done online or over the phone, and you’ll typically need to provide details such as the card number, the security code (usually on the back of the card), and personal details for registration if necessary.
Using the Prepaid Card: Now that your prepaid card is loaded and active, you can use it just like any other debit or credit card. Bear in mind that if you exceed the loaded amount on the card, the transaction will be declined.
Reloading the Card: If you have purchased a reloadable prepaid card, you can add more money onto it when the balance runs low. Reloading can be done online, at designated reload locations, or sometimes via direct deposit.
Keep Track of Your Spending: Prepaid cards are an excellent way to manage your spending because once the money loaded on the card is spent, you can’t use the card until it’s reloaded. Make sure you keep track of your spending so you don’t run out of money at an inconvenient time.
A few cautionary points to consider while purchasing a prepaid card with a credit card:
Your credit card company might categorize buying a prepaid card as a cash advance, which usually comes with higher interest rates and possible fees.
Prepaid cards generally do not help build credit since they don’t report to the major credit bureaus.
The protections offered to traditional credit and debit card users such as fraud or theft may not apply to prepaid cards.
In conclusion, buying a prepaid credit card with a credit card is a relatively simple process. It can be a practical tool for managing your finances, gifting, and even making transactions that require a debit card. As with any financial decision, it’s essential to understand the costs involved, choose the right product, and use it responsibly.