Payset prespective
January 6, 2023

‍Do Prepaid Debit Cards Affect Credit Scores?

Wondering whether prepaid debit cards bought online will affect your credit score? Read our guide, which will help you learn more about how prepaid debit cards work.

With the rise of digital commerce, card payments now account for a large portion of transactions in retail and online settings.

Though members of the public are increasingly turning to card-based payments, not all cards are the same. Prepaid debit cards that have been set up online and credit cards can be used in similar ways, but each type of card is financed through quite different means.

Those differences mean that using prepaid debit cards that have been set up online is a convenient way to spend money without impacting your credit card or your credit score. Here's what you should know.

What Are Business Debit Cards?

Business debit cards are payment cards that you can use to spend a pre-loaded balance.

You must load funds onto prepaid debit cards online before you start using them to spend money. You can load funds onto prepaid debit cards online in a variety of ways, but you can usually do so by sending money to your prepaid debit card provider from another account.

Prepaid debit cards that have been set up online are sometimes offered by companies better known for issuing credit cards, such as Visa. However, prepaid debit cards are not actually credit cards. Unlike credit cards, prepaid debit cards set up online do not come with a monthly bill that contains a record of your earlier spending; instead, they are funded in advance of spending.

What Is a Credit Score?

A credit score is a rating that represents your credit risk.

Your credit score is most important in relation to your credit card, as it will determine your spending limits and interest rate. It also indicates how likely you are to pay your credit card bills on time. The most widely used credit score system is the FICO Score

Your credit score may be affected by various factors. If you make payments on time, use only a small percentage of your credit limit, and have held your account for a significant amount of time, your credit score will likely be raised by your card provider.

In addition to impacting your credit card rates, your credit score can also affect the terms of your other financial services, such as loan interest rates, insurance premiums, qualification for a mortgage, and more.

Do Prepaid Debit Cards Affect Credit Scores?

Prepaid debit cards set up online almost never affect credit scores.

As long as you load funds onto your prepaid debit cards from a bank account or similar service, your credit score and credit card will never come into play. 

Prepaid debit cards may come with other transaction fees and reloading fees, but you will never have to pay monthly interest on prepaid debit cards for online purchases. Since you won’t pay credit card-related fees, spending with your prepaid debit card online won’t affect your credit score.

If your debit card provider allows you to load funds from a credit card, you will have to pay your credit card bill for that card as usual. However, this feature is rare and prepaid cards often cannot be loaded with a credit card at all.

This approach to spending means that prepaid debit cards set up online are a great way to spend money if you have a poor credit score—or even if you have no credit score at all. On the other hand, if you want to build up a credit score, you'll need to look at other options.

Alternative Options to Help You Build Your Credit Score:

There are plenty of ways to improve your credit score. For example:

Make payments on time. If you regularly make payments by your bill's due date, you'll be given a higher credit score. If you miss a payment, pay as soon as possible. You may be able to set up automated bank payments to ensure that bills are paid on time.

Pay as much as possible. If you can't pay the full amount that you owe on your monthly credit card bill, try to make the minimum required payment.

Don't go over your limit: First-time credit card users typically have a credit limit no higher than $1,000. Long-term credit card users have an average limit of $30,000. It's best to use only a fraction of that limit (between 7% and 30%).

Ask for a higher limit. Sometimes it is possible to get a higher credit limit just by asking. Talk to your bank or credit card provider for more information.

Keep your account open. The longer you’ve maintained an open line of credit, the higher your score will be. Even if you stop using one of your credit cards, you should keep it active to show that you have used it responsibly in the past.

Maintain a credit mix: By maintaining multiple diverse lines of credit such as credit cards, loans, and mortgages, you will likely be given a higher credit rating.

Become an authorised user: You can become an authorised user on a credit account that belongs to a spouse or a family member. You will share a line of credit with that individual, but you will get your own card for spending. This option is useful if you don’t yet have a high credit score in your own right.

When Are Prepaid Debit Cards a Good Idea?

Prepaid debit cards are a good option if you don’t have a high credit score. 

Using prepaid cards online is also useful if you want to limit spending. You’ll never spend more money than you have loaded onto the card. This is a useful feature if you are sharing a card between business members or if you want to control your own spending.

Prepaid debit cards online are also useful if you are concerned about your card being lost and stolen. If someone gains unauthorised access to your card, they won’t be able to spend more than the card’s balance, and you may be able to disable the card remotely.

Finally, prepaid debit cards are easy to reload. While bank savings and checking accounts may include a debit card, those accounts may also have spending and usage limits. 

With debit cards online, you can deposit or load funds in a variety of ways. Depending on the service, you may be able to load your card via bank transfer, third-party payments, ATM deposit, or even in cash at an in-store location.

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Frequently asked questions

What is a multi-currency account/virtual IBAN?

A Payset multi-currency account allows you to receive money in 34 different currencies and send money in up to 38 currencies, all within the same account.

You can deposit and withdraw funds, convert currencies at competitive exchange rates, and hold your chosen currencies to capitalize on market movements.

A Payset multi-currency account allows startups and business owners to receive payments from clients virtually anywhere in the world and pay suppliers, staff, and contractors quickly and affordably in their chosen currency.

  • Funds can be deposited and withdrawn from the account for a small fee.
  • Account holders can send and receive money with other Payset users for free.
  • Depending on your region, you can use various payment networks from your Payset account, including SWIFT, SEPA, ACH, Fedwire, Faster Payments, BACS, and CHAPS. 
  • Once you register an account, you will be provided with a Virtual IBAN (International Bank Account Number), which makes all of these transfers easy.
  • We provide you with local payments and collections. For example, transactions in USD, EUR, CAD, and GBP are processed through the local payment networks, which is far cheaper and takes minutes as opposed to days

Are there limits on the amount of money I can send and receive?

No, there are no transaction limits on Payset multi-currency accounts.

However, higher-volume transactions may require additional anti-fraud verification. If you plan to make a large transaction, contact us in advance to avoid verification delays.

How is Payset regulated?

Payset is regulated as an authorized Electronic Money Institution by the UK Financial Conduct Authority. Our activities are also regulated by the Payment Services Regulation 2017 and the Electronic Money Regulation 2011 (SI 2011/99).

How do I send money from my account?

Once you have opened your verified IBAN account and added money to a balance, transferring funds is simple.

Simply log in into your account and add a beneficiary, then simply “make a transfer” in your preferred currency to that beneficiary.

Information contained in this publication is provided for general education and information purposes only and should not be construed as legal, tax, investment or other professional advice or recommendation, or an offer of, or solicitation for, any transactions or any other actions (or refraining therefrom); This material has been prepared without taking into account any particular recipient’s financial objectives or situation. We make no warranty, guarantee or representation, whether express or implied, as to the completeness or accuracy of the information contained herein or fitness thereof for a particular purpose; Use of images and symbols is made for illustrative purposes only and does not constitute a recommendation or advice to take or refraining from any action; Use of brand logos does not necessarily imply a contractual relationship between us and the entities owning the logos, nor does it represent an endorsement of any such entity by Pay Set Limited, or vice versa; Market information is made available to you only as a service, and we do not endorse or approve it; Any reference to past performance, predicted returns, or likelihood performance scenarios may not reflect actual future performance and certainly do not guarantee future outcomes.

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