Re-loadable credit cards definitely exist if you consider prepaid cards as a type of credit card. Re-loadable cards are actually prepaid credit cards with the option to reload them with cash.
They are available in a number of different varieties, from the basic kind you would but in a convenience store to the type you would apply for online almost like a normal credit card. You could also make the argument that a secured credit card is a different type of re-loadable credit card. In truth, neither extends a line of credit to the user.
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The biggest difference between re-loadable credit cards is often the fee structure. You can purchase a prepaid credit card but you will usually be charged an activation fee, a reload fee and maybe even monthly fees, annual fees or inactivity fees. A different type of re-loadable card can be obtained online, one in which there are less fees or even no fees, but the card has to be reloaded through regular direct deposits from your paycheck or bank account.
A secured credit card is also technically a reloadable card, since you would supply the cash balance that is used on the card and you could reload it. The difference is that a secured credit card has a more traditional application process, so you will need to submit to a credit check to get one, whereas prepaid cards are generally given to anyone who puts up the money for them.
Do re-loadable credit cards help me build credit?
Basic re-loadable prepaid cards do not always help build credit, but they can. Some card companies will periodically report activity to credit agencies, so if you pay your cards on time, they may be helping you build good credit. Other cards do not report to the credit bureaus, so they have no effect on your credit whatsoever.
Secured credit cards do report to credit bureaus and are an excellent way to build credit, again assuming that you pay your bills on time. Conversely, they can hurt your credit if you are habitually late to pay. If you are unsure of what your credit rating may look like, you should get a report from a credit bureau like Experian.
What are the benefits of re-loadable credit cards?
One huge benefit of re-loadable credit cards is that you can obtain them with no credit or bad credit. In this day and age, you simply can’t do some things without a credit card anymore, like renting a car, getting a hotel room, or shopping at many websites. A re-loadable card not only lets you do this with questionable credit, it saves you the hassle of having to keep buying single-use prepaid cards.
Re-loadable credit cards are great for theft protection, because you know that if someone steals your card they only have access to the current balance. They can’t run up bills all the way to your credit limit like on a normal credit card. For similar reasons, re-loadable credit cards are good for students. Parents can load the card with however much money they want their child to have and they can spend up to that amount and no more with all the ease of a credit card.
There is some merit to the idea of using re-loadable cards as gift cards, too, particularly for employees. If you give sales staff a monthly performance bonus, for instance, you can issue them a re-loadable credit card and simply add their bonus money to it each month. They can be used for personal gifts as well, but the fees attached to some may make it counterproductive.
Another benefit of some re-loadable cards is that they offer a certain degree of anonymity. Many that you buy over the counter do not require a lot of personal information, so this can be an anonymous credit card.
What are the problems with re-loadable credit cards?
The biggest problem with most re-loadable credit cards is the fees. According to an article in USA Today, re-loadable credit cards may charge fees for activation, deposits, monthly use, ATM withdrawals, balance inquiries, paper statements, customer service calls and even closing the account. Of course, not all cards charge all those fees, but most have at least a few of them.
Another problem with re-loadable credit cards, and really prepaid credit cards in general, is that they are not always accepted everywhere a traditional credit card is accepted. This seems to be the case for some online merchants and subscription services.
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