Prepaid credit cards and secured credit cards are unsung heroes in the financial world. People rejected for regular credit card accounts due to poor credit can obtain a secure credit card and get back on the road to credit score recovery. Basic prepaid cards are great for anyone who needs a major credit card to book a flight, place online orders, or make hotel reservations. What`s more, they`re perfect for teaching teenagers and college students the importance of using credit responsibly, since prepaid cards limit their purchasing power.
Prepaid cards and secured credit cards are similar, but also work very differently. Prepaid credit cards are basically cash loaded onto plastic. They`re safe and convenient, but your activity is not reported to any credit bureau. Secured credit cards require a similar upfront deposit, but your spending limit is a percentage of the deposit. In essence, you`re still using credit so your activity will be reported to the credit bureaus. This can come in handy for anyone trying to re-establish credit.
A prepaid card looks exactly like any other credit card. It will have the MasterCard or Visa logo and holograms and works like a signature-based card. Your spending limit is determined by how much money you load onto the card. Reloading money onto the card is as easy as visiting the card`s website or returning to the place of purchase. Because you are not borrowing money and you`re only using your own, no finance charges or interest will accumulate. You can use the card at an ATM if you use your PIN number and stolen cards can be reported to customer service immediately, keeping you safe from unauthorized transactions.
Obtaining a prepaid credit card is easy. Many supermarkets and major chain stores carry them near the registers. You simply tell the cashier how much you want on the card and they will load it for you. There is generally a fee to purchase the card, which doesn`t go toward the balance, so be mindful of that before making the purchase. You can also obtain prepaid credit cards online, which is a great way to compare them. Prepaid cards are accepted anywhere the card brand is accepted, so if you buy a Visa prepaid card you can use it at any venue that accepts Visa. There is no interest charged and it`s safer than carrying cash.
Secured credit cards come with a lot of fees including an application and annual fee. Some even have monthly fees and extra charges when you want a credit limit increase. You can compare secured credit cards online or inquire at your bank or credit union.
Not having to carry around cash in your pocket brings a certain level of peace of mind, especially when you are traveling or shopping around the holidays. Having a prepaid credit card is ideal because you know exactly what your spending limit is but you never have to worry about losing any cash. They`re great for anyone looking for that sense of security. Secured credit cards, however, are for those that need to rebuild their credit. Maybe you have used a mortgage calculator and determined that you`ll never qualify for a decent interest rate on a home without improving your score. If that`s the case, try a secured credit card.