SECURED CREDIT CARDS

Secured cards are basically credit cards that are backed by a savings account used as collateral on the credit available with the card. Money is deposited and held in the account backing the card. The limit will be based on both your previous credit history and the amount deposited in the account.

This type of credit card is used by people with little to no credit or a past history of bad credit. The major benefit that these cards provide is the ability to rebuild or establish a credit history which at some point may allow users to gain unsecured credit cards or other forms of credit finance. Another benefit of secured cards is that holders can purchase products that can only be paid for with credit cards such as with some online retailers.

PREPAID CARDS

Prepaid cards are exactly what they sound like: you pre-pay or load money onto the card so that you can spend it at a future date. So you can only ever spend as much as you put in.

Prepaid credit cards are a great option if you are unable to get approved for a secured or unsecured card. You get the convenience of being able to use plastic and not having to carry around cash. These credit cards act in a similar fashion to a debit card where the funds are taken directly out of the account as you spend the funds.

Pre-paid cards are great for someone that needs to develop the discipline of keeping a budget and paying off bills. Let’s face it, when you have bad credit, the last thing you want is another credit card.

So that’s a quick overview of three major categories of cards. Not too difficult, huh? Now, sit down and really think which situation is best for you and remember to never spend more money than you can afford to!