Do Prepaid Cards Build Credit?
This guide explains why prepaid cards do not build credit and what to use instead.
Why prepaid cards do not build credit
A prepaid card is funded with your own money in advance, and you can only spend what you have loaded, so no borrowing happens. Since credit is built by borrowing and repaying, and prepaid cards are not reported to the bureaus, using one, however responsibly, creates no credit history and does not affect your score, just like a debit card.
Prepaid versus secured cards
The confusion usually comes from mixing up prepaid cards with secured cards, which look almost identical. A secured card also requires money upfront, a refundable deposit, but it is a genuine credit card: you borrow against your limit, and the issuer reports your payments to the bureaus. That reporting is the whole difference, and it is why a secured card builds credit while a prepaid card cannot. Our comparison of prepaid versus credit cards covers the distinction.
What to use to build credit
If your goal is to build credit, choose a secured card, a credit-builder loan, or authorized-user status, all of which report to the bureaus. Prepaid cards are fine as a budgeting or spending tool, or for someone who cannot get a bank account, but they are not a credit-building product. The full path is in how to build credit.
- A prepaid card spends money you load, not borrowed money.
- Prepaid activity is not reported to the credit bureaus.
- Using one builds no credit history.
- A secured card looks similar but does build credit.
- Do not confuse prepaid with secured cards.
Frequently asked questions
Related reading
