Most prepaid cards 'do not improve credit ratings'
17 March 2010 15:38:36
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| Most prepaid cards cannot reverse credit damage from the past. |
Consumers have been reminded that using a prepaid card will not necessarily help them to improve their credit ratings.
Responding to a question on Cincinnati.com, money experts Nathan Bachrach and Ed Finke explained that prepaid cards are useful for pre-loading or re-loading with cash.
They also noted that although prepaid cards benefit some individuals as they can be secured without credit checks, the majority have no future impact on credit files.
"You need credit to get credit. The only way to build credit is to open a line of credit that will report to the credit bureaux," they wrote on the website.
"While you want to avoid 'bad' debt, such as bills you cannot pay, you should consider establishing revolving credit."
However, one exception to the rule is the CashPlus Gold prepaid MasterCard, which offers a feature known as 'creditbuilder', designed to help individuals build their credit ratings.
Customers are lent a full year's worth of interest-free monthly fees in advance, although the money is not made available to spend on the prepaid card.
This loan is subsequently repaid by monthly transfers from the card and a record of these transactions is then sent to credit reference agencies.
Frank Jenkins, of loansafe.org, recently advised Britons that prepaid cards are useful because applying for one is a "really simple task".
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