What looks like a credit card, is often called a credit card, serves the same purpose as a credit card but isn't really a credit card?
Answer: A prepaid credit card.
A prepaid credit card—sometimes called a prepaid debit card—can be an alternative for people who either can't get a regular credit card or who want to control their spending. After you load the prepaid credit card with a certain amount of money you can keep using the card until that money is gone. You'll have to add more money if you want to use it again.
While there are benefits to using prepaid credit cards, it's important to realize that there are some very real financial disadvantages to using them:
Fees, fees and more fees. When you apply for a pre-paid credit card, you'll need to pay a sign up fee. After that you may have to pay a fee each month (and these can get high) and a fee each time you want to reload the card. (If you opt for direct deposit onto your card from your paycheck these monthly fees may be waived.)
You may have to pay a fee if the balance on the card gets below a certain level or if you use the card to withdraw cash from an ATM more than once a month. Some companies even charge if you use an ATM to check the balance on your card. You may get charged an inactivity fee if you don't use the card frequently enough.
These additional charges can add up quickly, so be sure to calculate just how much all those charges are going to cost you.
Before you decide to get a prepaid credit card, be sure to read all the terms of the card agreement carefully. You may also want to check out the Federal Deposit Insurance Corporation’s Consumer News article on Prepaid Cards.