Prepaid credit cards don’t help in building your credit history for the simple reason that they are not reported to the credit bureaus. Prepaid credit cards are secure line of credit and are more like debit cards because the money that is available to you on a prepaid credit card has already been paid to the bank. A prepaid credit cards comes under the category what is commonly known as alternative credit. Alternative credit is a form of credit that resembles traditional credit in many ways but is different.
The common examples are payments for utility bills, mobile phone contracts and even payment for housing rental. In all these cases an individual makes payment for services provided but there are certain elements may seem that do not permit them to be viewed by the national credit bureaus as actual and pure credit accounts. For one thing many of these payments are made for essential services and for another that reporting of utility payments is not permitted by the law in many states the credit bureaus are considering including such transactions in a credit rating a person since the payment pattern so closely resembles that of credit.
But before that happens any reporting business would have to meet the requirements of the Fair Credit Reporting Act and the Fair and Accurate Credit Transactions. In order to do so it will require purchase of new equipment, implementation in technologies and perhaps hiring new staff all of which involves a significant cost to the businesses. Till the time that happens prepaid credit cards and other forms of payments that come under the category of alternative credit do not get reported to the credit agencies and in no way serve to building a positive credit history.
The upside for having a prepaid credit card is that it is easier to get than a traditional credit card specially in case of a person who does not have a good credit history or does not have a credit history that all. Prepaid credit card can help you get a foot inside and the process required for building a good credit history. After displaying responsible uses and management of your prepaid credit card your credit may be willing to extend you a traditional credit card after which you can start building your credit history.