How do Prepaid Debit Cards and Secured Credit Cards Differ?

With many credit options available in the world of finance, a lot of people think that debit cards and credit cards are essentially the same. Whether these plastic cards are prepaid or secured does not matter at all. What is important is that these cards provide the convenience of shopping without the use of cash.

But in reality, the differences between a prepaid debit card and a secured credit card are of great importance. How come? By knowing the distinction between these two card programs, you can be guided in choosing the right plastic card that will work best with your financial status. This way, you can avoid falling into debt traps and paying for large financial obligations.

Now, let us discuss how these two card options differ from one another.

Differences between the Two Card Options

Let us use several criteria that will point out how a secured credit card differs from a prepaid debit card. These criteria are:

1.The purpose of the initial deposit – Both secured credit cards and prepaid debit cards require the submission of cash deposit to make up for the applicant’s bad credit. However, issuers of secured credit cards usually ask for a minimum of $200 security deposit to open an account.  The deposit will serve as the credit limit at the same time.

On the other hand, debit cardholders are not provided with a credit line.  Once a debit card is used, payment is automatically deducted from the debit account.  Hence, a debit cardholder can only use his/her card while there is existing funds available.  When the balance runs out, he/she must make a new deposit before the debit card can be used for new transactions.

2.Bearing of the card transactions – The payments made on a secured credit card is often submitted to credit bureaus. This way people with bad credit can monitor the progress of their credit ratings. On the other hand, the transactions made using a prepaid debit card are not notified to credit authorities. They do not have bearing on your credit report, because you are actually using your own money.

3.Rates and Charges – When a secured credit cardholder fails to pay back the balance on time, he/she will be incur interest rate charges.  On the other hand, interest rates do not apply to debit card transactions because the charges are automatically paid using the money deposited in the debit account.  However, additional charges may apply for each transaction made, depending on the debit card issuer’s terms.

After this discussion, we hope that you can now point out the distinction between these two plastic card options. This way, you can decide which of these two card programs you should take.

About the Author

Tara Tiemann is a credit analyst for which has been a resource site for people who want to live debt free. If you are on a budget using prepaid debit cards,prepaid credit cards and prepaid cell phone service can save you big money!

About Liz Roberts

Liz Roberts is the new credit specialist for Go-Prepaid. If you are on a budget, we can get you discounted cell phone service from Sprint, Verizon and T-Mobile! NO CREDIT CHECK ! Using a prepaid services can save you a TON of money! Follow our blog to find out how!

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