Differences Between A Prepaid Debit Card And A Secured Credit Card

Debit cards and credit cards are different from each other

. This is a very important fact many consumers are unaware of. All that matters to them is that they have a credit card they can use to make purchases and pay bills.

However, such belief can lead to financial problems. For example, if an individual will not closely consider the differences between a prepaid debit card and a secured credit card, he will most likely choose a card program that is not suitable to his financial standing. And this can spell out bigger credit problems in the future, especially when he does not know how to manage his card account properly.

So, to avoid this scenario, we encourage our readers to identify the factors that distinguish one card program from the other. Doing this will help you choose the right card that will work to your advantage.

Below are the differences between the two popular card programs - secured credit cards and prepaid debit cards.

Differences Between the Two Card Options

Below we have identified three criteria that will highlight the differences between a prepaid debit card and a secured credit card.

1. The purpose of the initial deposit - Fact is that secured credit cards and prepaid debit cards really requires an applicant to submit a certain amount of cash deposit. However, the purpose of such deposit varies from one card program to the other. For example, issuers of secured credit card programs oblige their applicants to provide a minimum deposit of $200. This amount will serve as collateral for the use of the card and as credit limit at the same time.

Meanwhile, the initial cash-out of debit cardholders will be directly deposited to their debit accounts. Since they will not be provided with credit lines, their initial deposit will serve as the available balance that they can use on their cards. When the funds run out, they can simply make new deposits on their card accounts. This will allow them to use their respective prepaid debit cards.

2. Bearing of card transactions - Payments made on secured credit cards are usually reported to the three credit bureaus. This way, people with poor credit ratings can easily monitor the progress in their credit history.

While any transactions made using prepaid debit cards are not being reported to the three credit bureaus. This is because they do not have impact on the credit history of an individual. After all, the prepaid debit cardholder is actually using his own money.

3. Rates and Charges - Consumers with a secured credit card who submit late payments or even miss one will be required to pay additional fees and interest rates. Meanwhile, interest rates do not apply to prepaid debit card programs. This is because the charges are automatically deducted from the initial deposit provided by the debit cardholder. However, additional charges may still apply for every transaction made with the use of a prepaid debit card. Such charges will depend on the terms and conditions stipulated on the prepaid card program.

After this short discussion, we hope that you can now distinguish a prepaid debit card from a secured credit card. And we hope that you can now determine which of these card programs will be most suitable to your financial and personal situation.

Copyright (c) 2010 Tara Tiemann

by: Tara Tiemann

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