What is a Prepaid Credit Card?

Prepaid credit cards are becoming popular amongst people as it is the most distressing way of using a credit card. It avoids the hassle of borrowing credit, having incurring debts and paying high-interest dues.

The prepaid credit card functions just like usual credit cards, except the fact that it requires a certain amount to be preloaded. It comes with a Credit Limit equal to the amount you’ve loaded on the card so that you spend responsibly.

How does Prepaid Credit Card work?

Since the prepaid credit card looks similar to the usual credit card, people get confused if they work the same. They both function differently. Prepaid cards are preloaded with a certain amount, so you can only use up till the loaded amount. In simple words, you use how much you load. There is no credit here.

This allows people to use the prepaid credit card responsibly and wisely. Best suggested for people who have no control over spending.

As prepaid cards are associated with major payment networks, i.e., Visa, MasterCard, Rupay, American Express, etc., they are accepted anywhere just like other credit & debit cards. You can easily load money as per your monthly budget and shop.

It also comes with an EMV chip and a security PIN, so all your transactions are safe.

Benefits of Prepaid Credit Cards

• Prepaid credit cards can be used just like any other credit card for making cashless transactions.

• You can spend without worrying about debts and paying high-interest rates on delayed dues.

• You can use prepaid cards while travelling. Load the amount you have budgeted the travel expenses and spend worry-free.

• Just like travel, prepaid credit cards can be an effective tool for budgeting monthly expense. Load your monthly grocery expenses, and use while shopping. This will limit your expense from unnecessary spending.

• Prepaid cards are not connected to your Credit Score. So, in any way, your score will not be harmed here.

• Most prepaid cards will allow you to schedule auto-payments. If you have any EMIs or monthly deposits, you can easily do from this card.

Types of Prepaid Credit Cards

There are different types of prepaid cards available

1. Open Looped Cards

Open looped cards also known as open-system cards and are issued by banks in partnership with the service provider. These cards come with the logo of the payment service providers like American Express, Visa or MasterCard.

2. Closed Loop Cards

A closed-loop card is accepted at affiliated merchant outlets and their related chain stores.

3. Semi-Open Looped Cards

Semi-open looped cards are accepted by a lot of affiliated outlets and chains. These cards are issued by retail chains or shopping malls. For instance, Pantaloons can be an example here.

4. Reloadable Cards

Most prepaid credit cards are reloadable cards, where you can add funds once the balance is low or nil.

5. Non-Reloadable Cards

It simply means that you cannot reload the money once used. Purchases can be done until the money is there. Once it is exhausted you need to dispose the card.

Banks offering Best Prepaid Credit Cards in India

Following is the list of banks that offer prepaid credit cards:

• SBI Bank
• AXIS Bank
• ICICI Bank
• HDFC Bank
• Yes Bank
• Bank of Baroda
• American Express

How to Apply?

A prepaid credit card can only be applied online on the respective bank websites. Here’s a basic guide on how you can apply online -

• Go to the company’s official website
• Under the card section, you will see a drop down of various types of cards. Choose "Prepaid credit card"
• It will take you to the various types of prepaid card offered by the bank. Pick the ones that suit your requirements
• Click on the Apply Online option
• An OTP (One time password) is sent to your registered mobile phone. Use this OTP to proceed
• Enter your personal details
• Select Apply, and proceed further

Documents

Following are the documents required to get a prepaid credit card-

• An identity proof issued by the government of India like Voter ID, driving license, aadhaar card, passport, ration card, etc
• Proof of Income
• Address proof
• PAN Card
• Passport size photograph