Difference Between Secured & Prepaid Credit Card

Secured credit cards can help you rebuild your credit.

Secured credit cards are different than prepaid credit cards. The reason for using a credit card will determine which type you choose. Prepaid credit cards are considered to be prepaid debit cards that carry a Visa or MasterCard logo.

Credit

Issuers of secured credit cards typically report to all three credit reporting agencies, helping you build or rebuild credit. Prepaid cards do not because you aren't paying back borrowed funds.

Application

Secured credit cards involve a credit check. Prepaid cards can be purchased from national chain stores or off the Internet and do not require a credit check.

Limits

Secured credit card limits can be set by the bank or you, and you're required to deposit the amount equal to your credit line with the bank in case you default on your payments. The limit on a prepaid card is determined by how much you load onto the card.

Use

Secured credit cards let you charge purchases as you would with a normal card, and you are obligated to pay the money back. With a prepaid card, you do not have to pay the money back.

Fees

Secured cards come with interest rates, annual fees and more. Prepaid cards will have activation fees or fees to use customer service.

References

• CreditCards.com: Credit Cards and Prepaid Debit Cards for People with Bad Credit