A history of poor credit doesn’t have to exclude you from being able to access financial products. The rise in popularity of prepaid cards means they are a useful alternative to those who have difficulty accessing mainstream banking solutions.
From people with no credit history or a poor credit history to those with bankruptcy and CCJs in their past and those classed as ‘underbanked’, a prepaid card has emerged as a welcome option.
Why is a Prepaid Card Good for People with a Poor Credit Score?
A prepaid card works in the much the same ways as a conventional debit card, except you have to load money onto it first before you can spend it. It comes with a card number, account number and sort code, so it allows you to make payments online. Many also enable you to set up direct debits and receive payments, such as wages, benefits.
If you have a low credit score, you may not be able to open a current account with a traditional bank that offers that option an overdraft or credit card. However, your credit history is not taken into account when taking out a prepaid card or an account like Suits Me®. This is because you can only ever spend the amount of money that is on the card at any given time, therefore there is no borrowing element involved.
How can a Prepaid Card Improve my Credit Rating?
A prepaid card is not based on credit, which means you don’t need to have a good credit history to get one. However, this also means that it won’t help you to establish a healthy pattern of borrowing and repaying.
This can be a problem for many people who have little to no history of borrowing or who have a low credit score due to a poor credit history. These people will want to be able to boost their credit score in some way, but prepaid cards don’t allow them to borrow and repay money.
What Options are Available to Improve Credit Rating?
As prepaid cards become more popular, they have started to diversify with a number of different kinds of prepaid cards coming on the market. One of these is something called a credit builder card.
A credit builder card works in much the same way as a standard prepaid card in that you load money onto it and only spend what you have on the card. However, the card issuer charges a monthly fee.
Paying this fee each month, on time is regarded as a repayment, therefore it allows you to build up some form of credit history.
Of course, you need to be diligent and make sure you pay the fee each month, but it is a low-cost way of boosting your credit rating without having to apply for credit and be turned down, which can have an adverse effect on your credit score.
Some prepaid cards have even started giving customers credit for smaller amounts between £500 and £1000. However, customers need to be certain they have the means to pay off any credit before taking it out as missing a payment will see your credit score tumble again.
Read our How to Improve Your Credit Score blog for more information on this.
Is Suits Me® a Prepaid Card?
Although Suits Me® can fall into the prepaid cards category, a Suits Me® account and with a debit card is so much more. All Suits Me® accounts comes with an array of banking-like features including direct debits, standing orders, UK transfers (international transfers are also available via a partner in our app) and more.
How do I get a Suits Me® Card?
To get a free Suits Me® debit card, simply open a Suits Me® account using our online application form. Once complete, your account will be open within 3 minutes, giving you instant access to your online account and mobile app to be able to start managing your money. Your Suits Me® debit card (better than a prepaid card) will then arrive in the post within 3-5 working days.