Get The Facts On Prepaid And Secured Credit Cards
Prepaid and secured credit cards have suddenly found themselves to be in high demand. The main reason being is that banks and credit card issuers have become much more reticent to offer credit of any kind and that includes credit cards. The recession has made it much more difficult to get credit, even for people with a fairly good credit history.
Historically speaking, prepaid and secured credit cards have been marketed to, and used by, consumers with bad credit or no credit history at all. But now with unemployment on the rise and an uncertain future more people are only buying what they can afford and not relying on credit as much as they have in the past.
With this in mind, the staff at www.bestcreditquote.com felt it was a good idea to point out exactly how prepaid cards and secured credit cards work. Let’s take a look at their similarities and differences with regards to cost, protection and credit scores.
Costs and Fees – Bear in mind that traditional credit cards make their money by charging interest on balances carried by their cardholders. With both prepaid and secured credit cards you will not carry a balance because you are using the funds you deposited, not the issuers. So in order to make a profit the issuers charge the cardholder for such things as monthly service fees, ATM withdrawals and perhaps even transaction fees on purchases.
Cardholder Protection – Credit cards offer excellent protection against fraud, theft and unauthorized use as mandated by Federal law. Prepaid credit cards offer no protection at all and secured credit cards will limit your liability to $50 if you report the disputed charges within 2 business days. After 2 days your liability increases to $500 and after 60 days you have no protection at all.
Credit Bureau Reporting – Many consumers choose secured credit cards because they report account activity to the credit bureaus. They are an excellent way to establish a strong credit rating, even if you have had financial troubles in the past. If it is your goal to build solid credit then make sure that the secured credit card you are interested in does in fact make reports to Equifax, Experian and TransUnion. Prepaid cards do not report to credit agencies.
No matter if it’s a prepaid card or a secured credit card you are interested in be sure to carefully read the terms of service spelled in the disclosure statement before you apply. Fees and benefits can very greatly from issuer to issuer and from card to card. Ask questions if you are not sure about anything and compare offers to make sure you get the best deal.
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