Prepaid credit cards, are also known as prepaid debit cards, are first and foremost, not credit cards. Rather, these are cards, which are already pre-loaded with money by the user. The user of these prepaid cards can determine the credit limit of the card by pre-loading the prepaid credit card with the amount of cash that the person is prepared to spend. They are however called credit cards because of the fact that they are accepted everywhere that credit cards are.

The issuer of these cards provides the user the facility to carry around a bank account to which all purchases can be charged without actually having a bank account. Another major advantage of prepaid credit cards is that they help avoid debt, due to the absence of both credit purchases as well as interest charges which generally accumulate on credit cards.

Prepaid credit cards are a very good option for people with bad credit, compulsive spenders, teenagers or people who mismanage their payments since there is no risk of running up any debt while making saving and budgeting easier.

Even though prepaid credit cards function and seem just like debit credit cards, there is a major difference between both in the sense that while debit credit cards draw funds from a bank's checking account, prepaid credit cards draws money that has already been loaded on to the card .Unlike debit credit cards, prepaid credit cards also do not require the use of a PIN for commercial transactions.

The credit line for prepaid credit card is set at the amount deposited and keeps coming down with the value of purchases. Therefore, prepaid credit cards are just a means of converting hard cash into electronic currency which can be accessed via plastic cards. Prepaid credit cards took off in the 90's when major credit card companies realised that there was a significant portion of the american population which could not qualify for a credit card. It was to capitalize on these consumers, who could form a sizable business for these credit card companies that secure credit cards were introduced. Later on, the same gave way to prepaid credit cards where funds are loaded on to a Master or Visa card through merchant locations or online banks.

Some of the principal advantages of a prepaid credit card are:

• the user does not have to worry about debt or overdue credit card payments
• a prepaid credit card is widely accepted worldwide, with MasterCard and Visa merchant acceptance
• can be reloaded with any amount of money over the phone, at ATMs or even online
• is safe and convenient to carry

The only disadvantage is that the holder does not have any credit to fall back on, this is the reason why anyone would want to get a prepaid credit card in the first option.