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What is a Prepaid Credit Card?

7 min read

Last Updated: September 9, 2025

Table of contents

Key Takeaways

Unlike a regular credit card, a prepaid credit card must be loaded with funds before it can be used for purchases.
Prepaid cards don’t require a credit check or any form of application.
Prepaid cards don’t help you build a credit history.

A prepaid credit card (also called a reloadable card, prepaid card, or prepaid debit card) is an alternative payment method to cash. At first glance, a prepaid credit card looks like a traditional credit card. Both types of cards usually feature the credit card company’s logo, a card number, and a chip or magnetic stripe on the card’s front. The back typically includes a security code and, potentially, the cardmember’s signature.

Many major credit card issuers offer prepaid credit cards. Like a traditional credit card or debit card, you may be able to use a prepaid credit card to shop online, over the phone, or in stores. However, unlike those similar payment options, you must load funds directly onto a prepaid card before making purchases with it.

How do prepaid cards work?

You can only use a prepaid credit card if you or someone else, such as an employer or the Social Security Administration, has first loaded the card with funds from another account. That deposit becomes its spending limit. If you try to spend more than that amount, your transaction generally won’t go through.

You typically use a prepaid card like a credit card or debit card: You may check out in a store or online, or withdraw cash from an ATM. But prepaid cards don’t allow you to access a credit line or bank account. You may only spend the amount that’s loaded onto the card.

Each transaction comes out of the card’s balance—you don’t have to pay any bills or worry about accruing debt on purchases. But prepaid cards also don’t build credit history.

How to load funds on a prepaid card

To use a prepaid card, you have to add funds to it. You might do that in a few different ways.

If you receive your paycheck or government benefits like Social Security payments on a prepaid card, your employer or government agency will typically load the funds to your card.
You might be able to use an eligible direct deposit to load some or all of each paycheck into a prepaid account. You may do this to help with budgeting.
You may reload the card with cash or a debit card at a bank, credit union, or retailer.
You may transfer funds from a checking account or savings account through your online account center or over the phone.
You may purchase reload packs from a store.

Differences between prepaid cards and credit cards

While you may be able to use prepaid credit cards and regular credit cards interchangeably to pay bills or buy a coffee, key differences set the cards apart.

Prepaid cards limit you to the amount you load on the card

The defining feature of a prepaid card is that it only allows you to access the money you’ve already loaded onto it. This limitation may help you avoid overspending. For example, you might load your shopping budget for the month onto a prepaid card, so you can’t exceed the amount you’ve set aside.

You may be able to view and manage your prepaid card’s balance and review the cardholder agreement through an online account center.

Prepaid cards may charge for use

The Federal Trade Commission (FTC) points out that a prepaid card issuer may charge fees for activating, using, or loading your prepaid card. Some prepaid cards also come with a monthly fee. If you’re considering a prepaid credit card, be sure to keep these additional fees in mind. You may find a full list of applicable fees in your cardholder agreement or online.

Credit cards might also come with various fees, like a balance transfer fee, late payment penalty, a foreign transaction fee, or an annual fee. But they don’t typically charge a monthly fee.

Some purchases on a traditional credit card, debit card, gift card, or prepaid card may also come with a transaction fee for processing the card payment.

Prepaid cards don’t help you build a credit history

Because prepaid cards don’t involve borrowing money, prepaid card issuers don’t report the activity to the credit bureaus, who generate your credit report. That means shopping with a prepaid card doesn’t build your credit history or credit score.

When you make purchases with an unsecured or secured card and repay your bill, your credit card issuer typically reports your activity to the major credit bureaus. Using a regular credit card responsibly may help you earn a good credit score.

A secured credit card may seem like a prepaid card on the surface. To open a secured credit card account, you have to provide a refundable deposit. But as you use a secured card, you don’t spend that deposit. Instead, you borrow from a line of credit. The deposit simply acts as collateral, which means the credit card issuer may keep the deposit if you don’t repay your balance. Unlike a prepaid credit card, a secured card may help you build credit history.

Did you know?

While a prepaid card may be a convenient payment method, it won’t help you build credit history. If you’re just starting your credit journey, or you want to improve your credit score, you may consider a student or secured credit card that reports activity to the credit bureaus.

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You don't have to qualify for a prepaid card

A prepaid card is relatively easy to access. Many traditional credit card and traditional debit card issuers offer prepaid cards. You don’t need a bank account, credit score, or financial history to qualify for a prepaid card. As long as you have the money to load onto the card, you can typically buy a prepaid card from a store, the same way you would buy a gift card. You may also get a prepaid card directly from a credit card issuer, bank, or credit union.

Because prepaid cards don’t require a credit check, they’re often a good option for people with poor or limited credit history. But keep in mind that a prepaid card, unlike a secured card, won’t help improve your credit score.

Differences between prepaid cards and debit cards

Prepaid cards are sometimes called prepaid debit cards. Like prepaid debit cards, regular debit cards don’t offer access to a line of credit or build credit history. Unlike prepaid debit cards, however, a regular debit card draws from a person’s bank account.

If you use your traditional debit card to spend more money than you have in your checking account or savings account without overdraft protection, you may owe an overdraft fee. You generally can’t overdraw at all on a prepaid debit card. Once you’ve spent the balance, you can’t use the card again until you’ve reloaded it.

If you don’t have a traditional bank account, you might use a prepaid card to set up direct deposit for your paychecks.

The bottom line

Despite some similarities, prepaid cards aren’t credit cards. Prepaid cards don’t build credit history or earn rewards. But a prepaid card might be a good fit in some cases, like if you don’t have access to a bank account or you want to prevent overspending.

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