How Is a Secured Credit Card Different from a Prepaid Card?

Although prepaid cards look like and are used just like credit cards, they really are more like debit cards. Your credit line depends on how much money you transfer to the card, and it decreases each time you make a purchase. In other words, with a prepaid card, you don’t really have a line of credit, you can only spend the money you have in your account.

In contrast, with a secured card, you make a one-time security deposit in a bank account, and then make monthly payment on your card as you would on a regular credit card. The deposit is only drawn down if you default on your payments. In addition, if you maintain a regular payment history, the card issuer will often reward you by increasing your credit line without requiring you to add to your security deposit.

Published: May 22, 2009