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 get, many Americans may now find themselves turning to these instruments to make their financial transactions.

There are some distinctions in the way that prepaid and secured credit cards work so let’s take a look.

Secured cards require to cardholder to first make a deposit into an account that the issuer keeps. The cardholder then is granted a spending limit that is equal to, but must not exceed that limit. Just like traditional credit cards, with secured credit cards the cardholder receives a monthly statement.

Prepaid cards operate very much the same way as the gift cards you find in retail stores. These cards are preloaded with money and the consumer is never sent any bills. They simply spend whatever limit that has been deposited with the issuer. If they should attempt to purchase something that exceeds their funds on deposit the transaction will not be approved.

Prepaid and secured credit cards should not be confused with debit cards. Debit cards are tied to the cardholders bank account, usually their checking account. All three forms of payment are widely accepted wherever plastic payment is.

While prepaid cards and secured credit cards (sometimes referred to as reloadable credit cards) were originally designed to be marketed to consumers with poor credit or no credit history, the recession we currently find ourselves in is forcing others to take a look at what their options are.

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