Prepaid Credit Card Frenzy: Why they are so hot in 2010

The market for prepaid credit cards is one of the fastest-growing segments of the multi-billion dollar credit card industry, and it is expected to continue to swell in 2010. Much of the reason for this surge is that prepaid credit cards are being marketed and advertised much more effectively – even being issued by famous pop stars whose logos appear on the cards as a kind of status symbol perk.

But the biggest fuel behind the prepaid credit card boom is, unfortunately, bad credit. Those who have bad credit due to a credit history that involves bankruptcy, mortgage default, or some other major problem cannot get traditional credit cards. During the recession millions of people found themselves suddenly in that unfortunate situation. And without a credit card it is not just inconvenient but sometimes hard to do simple things like rent a car. So people turn to prepaid cards as a way to get some plastic in their wallets until they have a chance to get their credit histories and finances back on track.

With a prepaid credit card you establish your own credit history, basically, and you decide for yourself what your credit card charge limit will be. In that way these cards can be very empowering – especially for those consumer who are sick and tired of being turned down for credit at banks and other financial institutions. The way the prepaid card works is that you deposit cash into an account, and that reserve of cash is used as your line of credit. You can charge on your card, make purchases with plastic, pay bills via credit card, or perform other typical credit card functions just as you would do with a conventional credit card, but only up to the amount that you have on deposit. Once the cash you prepaid into the account is used up, the credit card is also used up and will not function for you anymore.

So prepaid lets you control your finances because you determine when and how much to put on deposit to back up the plastic. Used wisely these card can be both convenient and helpful because you have the freedom of a credit card paired up with the responsibility that comes from managing money intelligently. Use a prepaid to shop, but also use it to improve your credit history so that you can eventually graduate to a full-service credit card.