What You Must Know About Prepaid And Secured Credit Cards

With more and more banks and credit card issuers restricting the flow of credit, consumers are finding it increasingly difficult to get approved for credit cards. This coupled along with the fact that the recession is now making it necessary to be less reliant on credit has sparked a rise in popularity of prepaid and secured credit cards.

Prepaid and secured credit cards were typically used by consumers that either had a poor credit history or no credit history at all. But we are now seeing a change in spending behavior. More and more people are making a conscious effort to live within their means and to not pay for their goods and services using credit.

Some important things you must keep in mind when using these financial instruments to make transactions include:

Fees – Many prepaid cards and secured cards carry fees and added expenses for using them. They can come in the form of monthly service fees, ATM withdrawal fees and in some cases transaction fees. Remember, credit card issuers make their money on the interest they charge when cardholders carry a balance. With prepaid and secured cards you are limited to the money deposited so the card issuers cannot charge you interest on your own money.

Protection – By law credit cards offer more protection to consumers than debit, prepaid and secured cards. In cases of fraud and unauthorized transactions you must notify your card issuer within two business days to limit your liability to $50. After two days your liability increases to $500 and past 60 days you are pretty much liable for the entire amount in question. Credit cards also offer purchase protection for the buyer while prepaid cards do not.

Credit Reporting – Secured credit cards report activity to the major credit bureaus and that is why they are a good choice for the consumer that is interested in building a solid credit history. Prepaid cards do not report to the credit tracking agencies so if you are looking to establish a good credit rating then go with secured credit cards over prepaid cards. Be sure to ask the secured card issuer you are interested in if they do in fact report to the credit bureaus. Do not just assume that they do.

Always be sure to ask any questions that you may have prior to filling out an application. Carefully read the terms of service that are spelled out in the disclosure statement before you apply. And shop around for the best deals. It is always a good idea to compare prepaid cards and secured credit cards in order to find the best offers.

Related Information:

  1. Prepaid And Secured Credit Cards See Growth Many financial experts predict that prepaid and secured credit cards will become increasingly popular with consumers as the recession drags on. With traditional credit cards being harder and harder to…
  2. Advantages And Disadvantages Of Students Using Prepaid Credit Cards The thought of giving students prepaid credit cards, as opposed to traditional credit cards, is in our view, a wise idea. However, there are many advantages and disadvantages for students…
  3. Secured Credit Card Offers Explained In some specific situations, secured credit card offers are an appropriate financial tool that can help an individual consumer meet their credit needs….
  4. Bad Credit Credit Card Application – Get The Facts Be sure that you identify exactly what the best type of card is for you prior to completing an application….