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.

Pay Now Or Later - Debit vs. Credit

Can't decide if you should shop with a debit card versus shopping with a credit card. Which is better, debit or credit?

Debit cards can have monthly or per transaction fees so review the cardholder agreement carefully. It is a rapid transaction between a merchant and your personal bank account. When you use a debit card, the bank subtracts money from your bank account.

One type of debit card is a check card that can be used as a credit card or as a debit card at grocery stores, gasoline stations, restaurants, or drug stores. When used as a credit card, you sign the receipt as you would a regular credit card. When used as a debit card, you enter your PIN. Some banks may charge a fee for using a check card as a debit card. A check card is identified by the word 'Check Card' across the top of the card. Visa has created a line of check cards with a Visa logo that can be used at all locations where Visa is accepted. Most, but not all, transactions are verified to see if there are adequate funds. Instead of using a PIN number, you must sign a receipt, as you would with a credit card.

Credit is money made available to you by a bank or other financial institution, like a loan. The amount the issuer allows you to use is determined by your credit history, income, debts, and ability to pay. You may use the credit with the understanding that you will repay the amount, plus interest, if you do not pay in full each month. You will receive a monthly statement detailing your charges and payments. Credit cards are protected under the Fair Credit Reporting Act, but debit cards are not. The Visa??? check card is linked to your checking account. Visa??? check cards have a zero liability policy that protects consumers, but not all banks have this protection.

If your debit or check card is lost or stolen, report it to your bank immediately. Government regulations require debit card issuers to set a maximum liability of $50 if the debit card is reported lost or stolen within two business days of discovery. Your liability increases to $500 if the lost or stolen debit card is reported within 60 days. If you don't notify the bank of the theft within 60 days after a bank statement is sent you could lose the money in your checking and overdraft accounts.

Here are six tips for protecting your debit card or credit card.

1. If your card is lost or stolen, immediately notify your bank.

2. If you suspect your card is being fraudulently used, immediately report it to your bank.

3. Always verify how much money you have available in your account. Be mindful that your debit card may allow you to access money that you have set aside to cover a check that has not cleared your bank yet.

4. Save your receipts from your debit or credit card transactions. A thief can use your receipt to get your name and debit card number to order products by mail or over the telephone. Your card doesn't have to be missing in order for it to be used.

5. If you have a PIN number, memorize it. Do not keep your PIN number with your card or in your purse or wallet. Also, don't choose a PIN number that a can be easily guessed such as your phone number or birthday.

Keep all of your receipts in one place so they can be easily retrieved later to verify against your monthly bank statement. 6.

Happy spending! I have used both debit and credit cards, but I am old-fashioned, and I pay for everything with cash. So think twice before using a debit card or credit card.

A consumer will be charged $30 for every transaction that occurs when the account is overdrawn. This is because there are no laws requiring prior approval to process the transaction. Be cautious when using a debit card, because some banks process debit charges although insufficient funds are in the account, which converts the debit transaction to a credit transaction.