Secured Credit Card vs Prepaid Card

by on February 8, 2011

Both these cards are advertised for people with bad credit card history. In general, if your credit history is bad then you should know properly about these cards. After knowing them both, you should make your decision. In this article, you will know about these cards.

Their Similarities

The secured credit card and prepaid cards require you to deposit funds. Only after the funds are successfully deposited you can use these cards. Both of these cards can be used in the same place as the credit cards. These cards can be used in grocery stores, and gas pumps. Now this is up to the point they are similar.

Their Dissimilarities

Secured credit cards need you to deposit a security deposit amount against the credit limit. You will be allowed to authorize the credit card after all the security deposits have been done. This security deposit will be kept in your savings account or certificate of deposit (CD). This amount is kept in these accounts until your card becomes an unsecured card. The credit card you use for your purchase will go against your credit limit. After you pay off your credit card bill, the balance is automatically adjusted. This procedure is just like a regular credit card. The only purpose of your security deposit is because you are a very risky buyer.

Prepaid credit cards on the other hand are different. The deposit you make is directly credited into your card. The purchase you do is automatically deducted from the balance. Once you have finished the balance, you can re-deposit the desired denomination and use it.

Fee Structure

The fee structures vary between these two cards. For a secured credit card, there is application fee, annual fee, finance charges, and late fee. The annual charges and late fee are waved off.

The prepaid cards are having different fee structures. It depends on the card you choose. Some of these cards have high fee structure. There is an activation fee at the starting. You may also have to pay a small fee while reloading money in your card. You will never be charged interest and late fee.

Which one you need?

If you want to work on your credit score then you can go for a secured credit card. Always make sure the terms and conditions of the card. Some cards are automatically converted to unsecure upon timely payments.

On the other hand, a prepaid card is a broader choice of the people. There are people who want to avoid banks choose this card. Many employers have the capability to deposit the money into a prepaid card. You can also check the funds in a monthly statement. The prepaid cards are good for teenagers who get allowance from their parents.

Prepaid cards can also be used as a gift cards. You can refill the desired amount and can gift your loved ones. The person can buy items of their choice from shopping centres where electronic cards are accepted.

{ 3 comments… read them below or add one }

Sallu Vs February 19, 2012 at 12:11 am

I have a check card and asked the bank what the difference was and they said its the same as a debit card that some banks just have a different name for them. I also looked around on the internet some when I got it and found that every where i looked it was referred to either a debit or check card as the same card. Here is what I found on wikipedia.

A debit card (also known as a bank card or check card) is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic cheque, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card.
Sallu Vs recently posted..Difference between Credit Card and Debit CardMy Profile


aaron April 8, 2012 at 12:07 pm

Yes, I was not aware about the small but huge difference between secured credit card and prepaid card earlier. When I read this post, now I fully understand things well. Even I can give an hour long presentation about it.

Thanks mate 🙂
Looking forward for such valuable posts.


Sri Katyayani April 26, 2014 at 8:33 am

Hi, its a nice article, till today the differences are not know that debit card is also known as bank card or check card. good article, keep it up


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