Prepaid Credit Cards and Secured Credit Cards
Author: weissheiss
If you have credit challenge one of the best ways to reestablish good credit is through prepaid or secured credit cards. Responsible people that once had good credit can take important steps to better their credit score by using these two types of cards. They have become very popular by a growing segment of the population.
SECURED CARDS
Cardholders that use this method will deposit a sum that usually exceeds the stated credit limit established by the issuer. This serves to create a good payment record which is critical in rebuilding your credit rating. If payment is not made the issuer can take funds from the account and is protected. One might ask “if I have the funds, why use a credit card?” Remember, we are trying to improve our credit score and this is an excellent method to achieve that goal.
PREPAID CREDIT CARDS
A prepaid credit card is similar to a secured card but in reality is not a credit card at all. A prepaid credit card acts more like a debit card, funds are taken from a prepaid deposit. One advantage over a secured card is there is no preset limit. You may deposit any amount in the account and draw up to that amount. Repairing bad credit is the goal here and many issuers offer these cards because of their low risk. Set up fees and monthly fees may apply so survey the market. Watch the fee structure so you do not end paying a large percentage in annual fees. The fine print is sometimes over looked by a consumer but in this case it should be closely read.
These types of cards are excellent for responsible high school students and college students away from home. Spending can be controlled and the student has a leg up on establishing credit. Your son or daughter will be very thankful you helped them do this after they graduate and apply for a standard card.
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