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Pre-Paid vs. Secured Credit cards |
Although many people don't realize there's a difference, pre-paid credit cards and secured credit cards can serve two very different purposes.
Both carry a Visa or Mastercard logo and can be used any place that traditional credit cards are accepted. Both require sending in money to the card issuer to function as "collateral" against the line of credit offered on the card. However, that's where the similarity ends.
Pre-paid credit cards work like a debit card where each charge is automatically deducted from the outstanding balance and lowering your current available credit - unless more money is added to the card. Secured credit cards hold the cash deposit solely as collateral and functions more like a traditional credit card allowing you to pay some or all of your balance off every month, but balances which are carried forth are charged interest.
Secured credit card issuers report to credit agencies the same as traditional credit cards whereas Pre-Paid credit cards do not. Because of this, secured credit cards usually require a credit check whereas pre-paid cards do not.
Learn more about each card before making your decision so you can choose which best will suit your needs and best benefit you with its use.
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