Will Prepaid Cards Build Credit? 

Will Prepaid Cards Build Credit? 

November 11, 2020         Written By Bill Hardekopf

Prepaid cards are readily available and incredibly versatile. You can use them for almost any purchase, and you don’t have to worry about carrying cash. If you purchased or received a reloadable prepaid card, you most likely have the option to register it in your name.

The new card will look and feel like a credit card, but does it act like one? Do prepaid cards build credit?

Featured Prepaid Card

Top Features:

No late fees or interest charges because this is not a credit card it is a prepaid card.

Do Prepaid Cards Report to Credit Bureaus? 

The activity on your prepaid card is not reported to credit bureaus. If you load money onto the card or spend money on the card, that information will not go on your credit report. There is no minimum monthly payment to report or other data that reflects how you manage your debts. The money on a prepaid card is not debt, and the prepaid card is not a line of credit.

Because of this, you cannot build credit with a prepaid card. Even if you reload the card with the same amount it had before, that is not considered a credit card payment. You’re simply adding funds to an account, much like making a deposit into a checking account. If you’re looking for a card to help you build credit, consider a secured credit card or credit builder account instead.

Top Reloadable Prepaid Cards 

You can’t use prepaid cards to build credit, but you can use them for convenient money management. If you’re looking for a low-cost banking alternative, consider these top prepaid card offers:

NetSpend® Visa® Prepaid Card


The NetSpend® Visa® Prepaid Card requires no credit check and no minimum balance. Enjoy the perks of mobile check deposit, text alerts, cash back rewards, and easy direct deposit for a low $0 to $9.95 monthly fee. You can even customize your card with a family photo! Apply online with no activation fee.

Netspend® All-Access ® Account by MetaBank®


The Netspend® All-Access ® Account by MetaBank® combines the features of a bank account without the need to visit a physical bank branch. Features include overdraft protection, cash back, text alerts, and direct deposits that pay up to two days in advance. Cardholders can also open a savings account that earns as much as 6% annual percentage yield.

Do Issuers Check Credit When You Register a Prepaid Card? 

Many prepaid card providers require you to register your card before reloading. You have access to the initial balance without registering the card, but you cannot deposit additional funds until you register it in your name.

The registration process involves several identity verification steps, but it does not include a credit check. You will need to provide your name, address, date of birth, and other contact details, but the prepaid card issuer will not check your credit report to register your card.

There are several reasons why issuers want you to register your prepaid card:

  • This is the only way to protect your account if your prepaid card is lost or stolen
  • Registering your card includes identity verification, which ensures that any direct deposits made to the card are valid and authorized
  • Prepaid cards cannot work with most ATMs unless they are registered
  • Registration allows you to dispute charges on the card with liability protection
  • This saves you from having to get a new card every time you want to make a deposit

Note that registering a card is different than activating it. Activation makes the initial balance accessible, but it does not put the card in your name. Not all prepaid cards require activation to use.

How Prepaid Cards Work 

A prepaid card is not a line of credit. It is a debit card that’s not linked to a bank account. Instead of depositing funds to a checking or savings account, you deposit them directly onto the card. Then you can spend your money just like you would if it were cash.

Featured Prepaid Card

Top Features:

No late fees or interest charges because this is not a credit card it is a prepaid card.

Where to Purchase a Prepaid Card 

You can purchase reloadable prepaid cards at a variety of retailers, including gas stations and drug stores. Retailers may charge a fee on the purchase of a prepaid cards. This money goes directly to the retailer and does not contribute to the available balance on the card. If you purchase a prepaid debit card online, you may be able to avoid this fee.

How to Use a Prepaid Debit Card 

When you purchase the prepaid card, you will make some sort of initial deposit. This could be in the form of cash, direct deposit, or other funding. The balance will be available once the card is activated. If you want to load more money onto your card, you will need to register it in your name based on the steps outlined by the card issuer.

Prepaid cards can be used for most in-store and online purchases. However, there are some limitations to keep in mind. For instance, if you use a prepaid card on Amazon, the available card balance must be enough to cover the entire transaction. You can use select prepaid cards on Venmo, but you cannot use a prepaid card for CashApp. If you’re trying to make any sort of revolving or open-ended payment, you most likely will not be able to use a prepaid card.

Prepaid Card Fees 

Nearly all prepaid cards come with fees. The specific fees will vary by card, but they may include:

  • Monthly fees
  • Annual fees
  • Transaction fees
  • PIN or Signature transaction fees
  • Balance checking fees
  • Withdrawal fees
  • Cash reload fees
  • Inactivity fees

It’s important to read over the card terms carefully before committing to a prepaid card. Find the card that best corresponds to your spending habits.

A Credit-Building Alternative: Secured Credit Cards 

Prepaid cards cannot help you build credit, but secured credit cards can. A secured card combines the function of a prepaid card with the credit-building components of a credit card. There’s no debt involved upfront, and you can easily qualify regardless of your credit history.

How Secured Cards Work 

On the surface, a secured credit card appears to be a prepaid card. You provide an initial deposit to act as the balance on the card. However, that balance transitions to a ‘line of credit’ for the card, just like a line of credit for a credit card. You can use the card for everyday transactions, and then you’ll receive a credit card bill to pay back. You can make the minimum monthly payment, pay off your balance, or pay some amount in between.

Why do you have to pay back your own money? Because secured card issuers report payments to the credit bureaus. This is how you boost your credit score and build your credit portfolio. Every month you make your payments on time, you show the card issuer that you can be trusted to repay a debt. There is no risk on their end because you provided the funds for the line of credit. That’s why almost anyone can qualify for a secured card; it’s a low-risk transaction for the lender.

If you decide to close the card account, you will receive a refund for any remaining funds on the card. You may also have the option to upgrade from a secured card to an unsecured credit card after several months of good payment history. Whatever you choose to do, you do not have to worry about losing money on a secured card. You will get back your security deposit, minus any fees or charges made to the card.

Top Secured Cards for Building Credit 

PCB Secured Visa®


The PCB Secured Visa® supports deposits between $200 and $1,000 in the first year, but that increases to up to $5,000 for the second year the account is open. Get 24-hour support for all your customer service needs, along with a fixed APR of 18.9%. Payments are reported monthly to all three credit bureaus.

OpenSky® Secured Visa® Credit Card


The OpenSky® Secured Visa® Credit Card requires no credit check to apply. All you need is a $200 minimum deposit and 5 minutes to fill out the application. The card carries a $35 annual fee, along with an APR of 17.39% (variable).

Assent Platinum 0% Intro Rate Mastercard Secured Credit Card


The Assent Platinum 0% Intro Rate Mastercard Secured Credit Card offers 0% APR for the first six months, and it supports deposits of $200 to $2,000. Your credit score is not considered during the application process, and you can get approval within minutes.

Do Secured Cards Have Fees? 

Secured credit cards have fees, which may include a monthly fee, annual fee, late payment fee or cash advance fee. Secured cards also have annual percentage rates (APRs) like traditional credit cards. You can avoid paying interest by paying off your balance in full within the grace period for the card. This is usually 20-25 days.

Can I Get a Secured Credit Card with Bad Credit? 

You can qualify for most secured cards if you have bad credit, limited credit, or no credit. Your security deposit acts as the line of credit for the card. The issuer does not have to provide any money for the account. Because of this low-risk relationship, issuers are eager to approve applicants for secured credit cards. You can apply for a secured card online and know within minutes if you’re approved.

Keep in mind that the amount of ‘credit’ you get approved for will be based on the value of your security deposit. Most secured cards have minimum and maximum deposit parameters that you will need to fall within. You may qualify for a deposit limit increase after several months of positive payments.

Tips for Building Credit with a Secured Credit Card 

Want to build credit with a secured card? Follow these smart money habits:

  • Don’t sign up for a secured card unless you have money available for the deposit. In other words, don’t use your rent money or take away from other necessary expenses in order to get a secured card. If having a secured card will cause you to fall behind on other payments, it’s not going to help your credit.
  • Use your secured card in place of your debit card. Save the money you would have used from your bank account, and then pay off your balance when the bill is due.
  • Make your card payments on time. Just because you’re borrowing from your own money doesn’t mean you can miss a payment. This will reflect negatively on your credit reports, and that defeats the purpose of getting a secured credit card.
  • Keep up with other debt payments. Having a long history of on-time payments will put you on the path toward a good credit score.
  • Dissect your card terms closely to understand your fees. Many secured card fees are easily avoidable. You just have to find ways around them. For instance, you might be able to check your balance on a mobile app to avoid an ATM fee, if applicable.
  • Don’t upgrade to an unsecured card until you’re ready. You don’t have to upgrade the moment the offer comes available to you. If you still need time to practice good credit card habits, wait a little longer before switching to a debt-based line of credit.

The information contained within this article was accurate as of November 11, 2020. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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NetSpend® Visa® Prepaid Card
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Applying for this card will securely direct you to the issuer's website.

Top Features: No late fees or interest charges because this is not a credit card it is a prepaid card. 

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Assent Platinum 0% Intro Rate Mastercard Secured Credit Card
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Top Features: All credit types welcome to apply!

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First Digital NextGen Mastercard® Credit Card
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First Digital NextGen Mastercard® Credit Card

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bill-hardekopf

About Bill Hardekopf

Bill Hardekopf is the CEO of LowCards.com and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 15 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor.