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Is secured card the same thing as prepaid card?

[Friday, January 28th, 2011]

No, these are two completely different types of cards, try not to confuse them. They have nothing in common except that these types of bank cards are for people with bad or no credit or people after bankruptcy and they both require an upfront deposit before you can use them.
Secured cards are credit cards that require initial deposit, also known as secure deposit, held as collateral against your revolving credit limit in case you default on credit card payments. This secure deposit typically equals to your credit limit. Secured cards are not reloadable which means you cannot increase you credit limit by adding more funds to your secured card account. Most secured cards report to the credit bureaus. These cards require monthly payments and come with interest rates, annual fees, and more. If you are turned down for traditional credit cards consider secured cards to improve your credit score. Some secured cards may be turned into unsecured credit cards after a year or so of timely payments.
As for prepaid cards, these are not credit cards at all. To use your prepaid card you load it with funds and spend what is on your prepaid card only. Once you run out of your prepaid card deposit, reload your card and use it again. There are some fees associated with prepaid cards but no interest rates, monthly payments, annual and late fees. Some prepaid cards do report the credit bureaus and some don’t.

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