What Is a Prepaid Credit Card?

A prepaid credit card lets you load your own money onto a card before you spend it.

Despite the name, it is not technically a credit card because you are not borrowing money. You can usually use a prepaid Mastercard or Visa anywhere that payment network is accepted.

KOHO Prepaid Mastercard

KOHO Prepaid Mastercard is a credit card alternative that lets you spend money you already have.

With KOHO Prepaid Mastercard, you can:

• Get instant approval with no credit check

• Spend only the money you load onto your account

• Pay no interest on your purchases

• Earn up to 2% cash back

• Use your card for in-store purchases, online shopping, and recurring payments

How Does a Prepaid Credit Card Work?

You add money to the card before making purchases.

For example, if you load $500 onto your prepaid card, you can generally spend up to $500.

If you spend $100, your remaining balance becomes $400.

You can add more money later if the card is reloadable.

Is a Prepaid Card Actually a Credit Card?

No.

A traditional credit card gives you access to money borrowed from a lender. You receive a credit limit and repay what you spend later.

A prepaid card works differently.

You spend money you already deposited. There is no traditional credit limit and no balance to repay at the end of the month.

Prepaid Card vs. Credit Card

The main difference is where the money comes from.

With a credit card, you borrow money and pay it back later.

With a prepaid card, you load your own money before spending it.

A traditional credit card may also charge interest if you carry a balance. Prepaid cards do not charge purchase interest because you are not borrowing money.

Prepaid Card vs. Debit Card

Both prepaid and debit cards let you spend your own money.

The difference is where that money is held.

A debit card is typically connected directly to a bank account.

A prepaid card has its own balance that you load separately.

Some prepaid cards operate through Mastercard or Visa. This can make them useful for online shopping and purchases where those networks are accepted.

Do You Need a Credit Check for a Prepaid Card?

Usually not.

Since you are spending your own money, the provider generally does not need to assess whether you can repay borrowed money.

This can make prepaid cards useful for people with limited credit history or people who simply do not want a traditional credit card.

Does a Prepaid Credit Card Build Credit?

A standard prepaid card generally does not build your credit score through everyday spending.

You are using your own money rather than borrowing and repaying credit.

If building credit is your goal, you would normally need a separate credit building feature that reports payment activity to the credit bureaus.

Can You Use a Prepaid Credit Card Online?

Yes.

A prepaid card can generally be used online anywhere its payment network is accepted.

You may be able to use it for:

• Online shopping

• Streaming subscriptions

• Food delivery

• Recurring bills

• Travel bookings

• App purchases

Some merchants may place temporary holds on your available balance. Hotels and car rental companies are common examples.

Can You Withdraw Cash From a Prepaid Card?

Some prepaid cards allow ATM withdrawals.

Fees and limits depend on the provider.

Before using an ATM, check for:

• Withdrawal fees

• Daily withdrawal limits

• Foreign ATM fees

• ATM operator fees

What Are the Benefits of a Prepaid Credit Card?

A prepaid card can help you:

• Control how much you spend

• Avoid credit card debt

• Avoid purchase interest

• Shop online

• Make in-store purchases

• Avoid carrying cash

• Get a card without a credit check

Some prepaid cards also offer benefits such as cash back.

Are There Any Downsides?

There can be.

Depending on the card, you may encounter:

• Monthly fees

• ATM fees

• Foreign transaction fees

• Reload limits

• Spending limits

A prepaid card also does not normally help build credit through regular purchases.

Is a Prepaid Credit Card Worth It?

A prepaid card can be a useful alternative if you want the convenience of paying by card without borrowing money.

It can be especially useful if you want to control spending or avoid credit card interest.

The simplest way to think about it is this: a prepaid credit card works like a payment card at checkout, but you are spending your own money instead of borrowing from a lender.