A pre pay credit card is actually a debit card. It will require you to first load money on your account before you can use the card for purchases. These are also commonly referred to as reloadable cards. You can purchase them at many popular retail locations.
These cards were designed for two reasons:
1. New credit laws - because Congress passed new lending laws were they set maximum interest rates and fees many credit cards that were designed for people with bad credit were removed from the market. Unfortunately they were no longer viable business opportunities for lenders which in turn translates into less available credit for you.
2. Credit crisis - when the mortgage collapse began many cards were taken off the market and banks completely stopped lending. They raised interest rates and charged fees which caused public outcry and Congress passed the new lending laws which has kept the previous cards off the market.
These cards work just like a bad credit checking account. This is because it will often give you free direct deposit. Additionally you are given an online bill payment service that will send payments to pay your bills. This will help to relieve the expense and hassle of check cashing fees and buying money orders.
These cards are created for individuals with a less than perfect credit history. There is no check or chexsystems check and you do not need a bank account. You do however have to comply with the US Patriot Act. This is standard and all financial intuitions must comply with this law, it was passed to fight funding of illegal activites. As long as you are a US resident and have a valid address then you will not have a problem.
Many people like these cards because you can not go into debt. You also do not run the risk of being charged an overdraft fee or bounced check fee. Instead you can only spend the money you have deposited in your account.
This will be issued as a Visa or MasterCard and can be used as such. You can use your card to buy things online and over the phone. You can also use it to rent a hotel room or rent a car. It will also be accepted internationally.
Your card will be covered under a zero liability policy in case you lose your card or have it stolen your money will still be safe. You will online access and customer support access. You can also get free email and text alerts about your account activity.
In our evolving economy having a Visa or MasterCard is becoming a necessity. If you only have access to cash you just don't have the same purchasing power as others. You can't rent a car, rent a hotel, and even just buying gas at the pump! You are also likely paying the high cost of living with out a checking account which means you are paying check cashing fees and having to purchase money orders.