A brief look at the separation of prepaid and secured credit cards.

Despite some peoples confusion over the matter the two are actually quite separate entities that function in different ways. Even though you can use a prepaid card in the manner of a credit card there is no actual “credit” involved in its use. No debt is incurred since you have prepaid and you are using the funds out of a prepaid account. The card only ever has an available balance of whatever you have deposited into the account the company holds for you for use with that card. You will never receive a credit limit increase because you are never borrowing money from the company; they are simply giving you a means to easily access your money with vendors that may only accept credit cards. A secured card however has slightly more akin with a regular credit card that you would be issued like a Visa or MasterCard. The way it works is that you give the company a onetime deposit that they hold against any possible infractions on your part in the use of the card. So if you’re late on a payment or exceed your limit they will take it out of your deposit. However if you are on time every month and act responsibly with your card, the balance remains untouched and the lender will usually, after a sufficient period of time, reward good faith with an increase on the credit limit you were originally issued. Before choosing a secured credit card or prepaid credit card you should first find keys to a number of important issues that will help you obtain the most favorable card for your needs. First you have to know what kind of rates and fees you are involved when signing up for a specific card. Be sure to review all of the terms carefully of course, but for this point, check out what kind of fees you will pay to sign up as well as how much they will charge for ongoing use of the card.