Secured and Prepaid Credit Cards - What are they?

What is a secured credit card?
A secured credit card is a credit card that has a deposit of equal amount to the credit on the account. For example if the credit limit is $400, then the consumer would deposit $400 to the company as a collateral. This deposit would only be used it the cardholder defaults.

The secured credit cards greatly reduce the risk to the banks and they are therefore easier to obtain.

When would you use a secured credit card?
If you should need to rebuild your credit or establish credit, secured credit card could be an option.
However it is not very frequently that you see advertisements for secured credit cards. Most banks have deemed the secured credit cards not profitable enough to continue issuing these secured credit cards.

Prepaid Credit Cards
Prepaid credit cards are really more like debit cards. You deposit money to the prepaid credit card account and then you can use the card that will withdraw from what you have on the account. There is typically a small set up fee and monthly fees associated with prepaid cards.

Only one person can be on the prepaid credit card account, but anybody can deposit money to the account. There is typically no limit to how much money can be deposited.

When would you use a prepaid card?
Prepaid cards can be used to rebuild or establish credit and they can also be issued to minors. These cards are quite popular with parents who have teenagers.

You can check online to see what credit card options you have if your credit is poor and you are trying to rebuild it. Secured or prepaid credit cards may be options and a fresh start for rebuilding your credit.