Prepaid Debit Cards Vs. Secured Credit Cards

I have listed these differences below. The truth is there are some distinct differences that may work better for people from different walks of life. Each of these cards will require funds to be deposited in advance before using them, so what?s the difference?

We get quite a bit of email asking about the differences between these two categories of credit cards so I decided to write a short article to explain the basics of each category.

Much like your bank debit cards they deplete funds in your account as you use them, they do not require monthly payments and do not charge interest. Prepaid Debit Cards - Prepaid debit cards are just that, debit cards that have the Mastercard or Visa logo on them and are accepted worldwide.

The major difference is how you qualify for one and how much it cost to use the card. Prepaid debit cards are not concerned with having card holders qualify for their cards. Most issuers do not verify employment, credit, addresses or even legal residency. This makes these types of cards very popular with immigrant workers in the United States illegally.

Debit cards are also more fee intensive than traditional secured credit cards. They have fees that are usually measured by transaction. Other fees include, loading fees, transfer fees, check deposit fees, annual fees and more. This is the price people have pay for convenience and anonymity. These cards will not report cardholder transactions to the credit bureaus, which is not ideal for those who are trying to establish credit.

In our society it is virtually impossible to live without some type of visa or Mastercard, debit cards fill this void. They offer a "de facto" banking system for those unable to qualify normally. They offer direct deposits for paychecks and many other features to a segment of society that traditional banks have left out in the cold. All in all, prepaid debit cards are pretty cool for some people.

Secured Credit Cards ? are credit cards that are specifically designed for people with bad credit. Most people that apply for these types of credit cards do so to build or rebuild their credit. The other advantages are they appear, look and act exactly like a regular credit card. Most prepaid cards are clearly marked as debit cards with outrageous designs and colors.

The price you pay for rebuilding your credit is interest. The worst thing is that you are paying interest on your own money! Unlike prepaid debit cards, secured cards usually carry pretty steep interest rate, usually around 15%. Secured credit cards are not usually ?re-loadable?. Meaning, once you make your initial deposit this becomes your ?credit limit?. Your payments will bring down the balance giving you more purchasing power.

Secured credit cards report to the credit bureaus exactly the same way a regular credit card does. Creditors that review your credit for purchases have no idea if your credit card is secured or not. Another thing to watch is that most people will fund their cards with money that they intend to use immediately. Meaning they send in $500 and expect to be able to go out and spend that $500 immediately on receipt of their card. This is not good borrowing practices and will actually bring down your credit score.

Credit cards are viewed as liabilities on your credit bureau once you borrow over half of your credit limit. The credit bureaus see this as a sign of credit dependency and discount your credit score 35%. When this happens you are hurting your credit, paying regular credit card fees, paying interest on your money and carrying around a maxed out credit card.

Credit bureaus do not show monthly payments; they only show the months you have had the account open and any months that you have been delinquent. This assumption could not be further than the truth. they can pay it back. Most people feel the need to charge something on the card to ?prove?

It will only cost you the price of the annual fee to keep it in their bank. Then leave it alone. Our advice to borrowers is to save up enough money so that your initial deposit is large enough to show a decent credit limit on your credit bureau, around $1000.

Unfortunately most people use them incorrectly and end up hurting their credit more than it was before getting the card. Secured credit cards can significantly help you rebuild your credit and have a positive impact on you overall credit score. When a future creditor sees your $1000 open line of credit, higher credit scores and the financial restraint you have demonstrated you will be much more likely to get the loan.

Secured Credit Cards: The Safer Bet

There are different types of credit cards. The credit card can be a really great financial tool to possess. Be sensible and use it, do not abuse it.

On the other hand, look at the convenience that it offers. But what we are talking about are the negative aspects of owning a credit card. There are many people who have ended up buying things with a credit card that they otherwise would never have purchased. This is true especially for people who feel a great urge to buy things when they have a credit card with them. There are many people who have ended up buying things with a credit card to be a risky proposition.

This is true especially for people who feel a great urge to buy things when they have a credit card with them. There are many people who have ended up buying things with a credit card to be a risky proposition. I have always considered a credit card with them.

Secured Credit Cards

Secured credit cards are the safer bet when it comes to owning a credit card. These credit cards require the applicant to deposit some money in a special savings account with the credit card company. Based on the amount deposited and on the income source and credit history of the applicant, the application is accepted or rejected. Secured credit cards have always been compared to debit cards. But these cards are different. In debit cards, the money is directly debited from the bank account. But in secured credit cards, it is a loan that you avail of based on the amount in the savings account. If you make the monthly payments regularly and on time, the money in your savings account is never touched. It is intact. Only if you default on payments, then the money is debited from the savings account. Secured credit cards are real credit cards. It can be a visa or a MasterCard.

Less risk involved

Credit card companies feel more secure when they deal with a secured credit card application. This is because, when the applicant is ready o deposit some amount of money, it creates an impression that he is serious about making the payments on time. Hence you will find that your application for a secured credit card has more chances of being accepted. These cards will also not cause a huge dent in your accredit scores. For those who do not know, a credit card is the easiest way for you to ruin your credit scores. So use a secured credit card and build up a good credit and payment history. It will help you when you apply for other credit cards or loans in the future.

Interest Rates

The interest rates for secured credit cards also vary according to the lender and the applicant. For example if an applicant is ready to deposit a large amount in the savings account, he may get a much lower interest rate. Some lenders have interest rates that start from as low as 9% and goes up to as high as 23% or more for secured credit cards. The annual fees also vary from $0 or $65 or more.

Minimum deposit

Whichever company you sign up for, ensure that you shop around a bit before you sign up for, ensure that you shop around a bit before you sign up for, ensure that you shop around a bit before you sign up for, ensure that you shop around a bit before you sign up for anyone of them. Some companies have a minimum balance of $500 or more. The minimum amount that you need to deposit also varies from one credit card Company to the other.