Prepaid cards and secured credit cards have a somewhat similar concept, and as a result, it’s common for these two types of credit cards to get mixed up. While they do have similarities, they have one main difference: only one will help you to rebuild your credit.
If you are looking to rebuild your credit and cannot qualify for a traditional credit card yet, a secured credit card is one of the perfect ways to increase your score and get your credit back on track. A traditional credit card is a form of unsecured debt; you are borrowing all of the money that you spend. However, a secured credit card will require a deposit, which makes it a secured debt. This deposit is meant to be collateral in case you default on your payments. As long as you have the money required for the deposit, you will qualify for a secured credit card and it can be a great method for building up your credit.
That’s not to say that a prepaid card doesn’t have its own benefits. If you don’t have a bank account or don’t feel comfortable using a debit card because it is linked to your checking account, a prepaid card can still be beneficial. Prepaid cards work a lot like debit cards in the sense that you are not borrowing money, but you are simply loading money onto the card and using it for things like online shopping, renting a car or hotel room, and so on. They are helpful tools for those who prefer the convenience of a credit card, but don’t want to risk getting into debt by borrowing money. Because a prepaid card doesn’t involve a line of credit, anyone can qualify for this type of card if you have the minimum deposit amount (although some cards don’t enforce a minimum amount, so any cash amount may be acceptable). But because of this, they also don’t have an impact on your credit score. As such, if you were thinking about opening a prepaid card for the sole purpose of rebuilding your credit, you’d be better off opening up a secured credit card account instead.
Are you receiving structured settlement payments, but you need cash now to eliminate debt? Our structured settlement purchasing transactions can help you to cash in some or all of your future payments and receive the lump sum payout you need. The cash payment you receive from Peachtree Financial Solutions can be used to pay off credit card debt, tackle student loan payments, avoid foreclosure, catch up on late car payments, and more. Contact us today to learn more about our structured settlement purchasing transactions and for a completely free quote.
Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.