Secured Credit Card and Prepaid Card – What is the Difference?
These kinds of cards are usually said as a great option for those who have bad credit, but which one is good for you?
Difference between Secured credit cards and prepaid cards
The secured credit cards and prepaid cards require you to make a deposit before using them.
A secured credit card will require you to make a deposit which serves as a security deposit for your credit limit before approving the card. This security deposit is placed on a certificate of deposit or a savings account (CD) and stored there on your credit card until you have a default on your credit card.
Applying for a secured credit card is like applying for a regular credit card. Many card issuers still check credit history, but you will be approved for it even if you have a bad credit history. When using a secure credit card, you’ll lend money like a simple credit card. Your credit limit is based on your security deposit.
Pay your Balance
When repaying your credit card balance, your credit will be returned as a regular credit card. A security deposit is required because you may be a bad user. Prepaid cards are different. These are usually credit cards that are usually prepaid credit cards. Instead, they are just like the debit cards that are linked to your account. No credit limit for a prepaid card. You make a deposit on the card and it will be credited.
When you scan a card for a purchase, the amount of your purchase will be deducted from your credit card balance rather than withdrawing the credit card issuer. Once you have spent on the deposit, you need to replace it before using it again.
With a prepaid card, you do not have to worry about paying monthly payments in order to avoid any defaults caused by delayed payments and debts. You do not have a credit for verification of a pre-paid card, so you will not be denied due to bad credit history.
Which card is more expensive?
The fees vary between both cards. The secured credit card is like a credit card so the fees are like that of a credit card. Fees on the application, annual fees, late payment, APRs and other. While some charges are inevitable If you use your credit card responsibly, you may be able to avoid some variable charges.
Prepaid cards are completely different, and depending on the card you choose, some of them may be higher. When you open your account for the first time, the activation fees and even monthly fees charged as long as the account is open. You can repay for using your card, pay for ATM, or pay for the service. Though we have certain prepaid cards that are free of course. Remember that Prepaid card has no interest or late payments.
Secured Credit Cards and Prepaid Cards
A secured credit card is the best option if you want to improve your credit score. Make sure you have selected a secured credit card issuer that reports to three major credit bureaus. Some credit card issuers can easily upgrade credit card to an unsecured one within 12 to 18 months if you meet the terms.
A Prepaid credit card is just an option for those who can not get a checking account or intend to escape banks. Many employers can pay your wages on a prepaid card. Prepaid cards are also useful for students and teenagers who still get stipends benefits from parents.