Title: Secured And Prepaid Credit Cards Word Count: 625 Summary: With so many consumers looking for ways to rebuild their credit, secur ed and prepaid credit cards are gro wing in popularity. Some people swe ar by them, and others try to avoid them. If you’re new to credit card s, you may have wondered how a prep aid card differs from a secured car d, and how either kind can be used to build credit. Secured credit cards work much like regular credit cards, but with les s risk to the card issuer. The card holder deposits money into an accou nt, w... Keywords: credit, credit card, credit cards, credit balance, credit history, cre dit rewards Article Body: With so many consumers looking for ways to rebuild their credit, secur ed and prepaid credit cards are gro wing in popularity. Some people swe ar by them, and others try to avoid them. If you’re new to credit card s, you may have wondered how a prep aid card differs from a secured car d, and how either kind can be used to build credit. Secured credit cards work much like regular credit cards, but with les s risk to the card issuer. The card holder deposits money into an accou nt, which is used to secure a line of credit. Typically, the cardholde r needs to deposit enough money to cover 100-200% of the card’s credit limit. For example, a one thousand dollar deposit would result in a c redit limit of five hundred to one thousand dollars. Secured cardholders are responsible for timely payments, just like reg ular cardholders. This is a good th ing, because it teaches good repaym ent habits and helps to establish a positive payment history – a very important part of rebuilding damage d credit. If a secured cardholder d oes default on a payment, the card issuer is protected; they can recov er their loss by taking it out of t he cardholder’s deposit account. Critics of secured credit cards poi nt out the difficulty of coming up with a lump sum of cash to use as t he deposit, and they do have a poin t; if cash is that tight, perhaps i t isn’t the best time to get a cred it card of any type. By contrast, prepaid credit cards a re not actually credit cards at all . They look like them, and can be u sed like them, but they are really more similar to debit cards. The ca rdholder deposits money into an acc ount and the prepaid card is then u sed to draw on these funds. No actu al credit is offered by the card is suer. Setup fees and small monthly fees usually apply. Prepaid cards can be issued to mino rs. These cards are popular with pa rents of teenagers who want their k ids to have access to a credit card , but one with a definite spending limit in place. No large, up-front deposits are required to obtain a p repaid credit card. The prepaid car d limit is up to the purchaser, who can load the card’s account with a n amount of their choosing. Prepaid cards can also be used to e stablish or rebuild credit. Some is suers give out cards with the Visa or MasterCard logo on them, and the se cards can be used anywhere those brands are accepted. Setup fees an d monthly fees vary by issuer, so d o a bit of research to find the bes t prepaid card for you. You will fi nd that your options are plentiful, and competition between issuers is steep – which is good news for pot ential cardholders. Secured and prepaid credit cards ar e similar in form and function, wit h a few notable differences. If you r credit is damaged or nonexistent, these cards present an opportunity to improve your situation. If you have a teen or young adult with an allowance, but don’t want to worry with cash or checks, prepaid cards can be a safe and convenient way to store their money. Likewise, if yo u have trouble limiting your own sp ending, you might want to try one o f these cards. But if your credit is average or be tter, and you’re able to control yo ur spending and pay off your credit card balance each month, you might be better off going for a standard , unsecured credit card. The intere st rate and fees will almost certai nly be lower, and you won’t have to worry about putting up a big depos it. There are many available cards to meet many needs. A little resear ch should turn up the card that bes t meets yours.
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