Secured And Prepaid Credit Cards by NiceTime

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									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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