Why choosing a prepaid card over a secured card?

Why choosing a prepaid card over a secured card?

Still thinking about going for a secured credit card? We can tell you this: saving a prepaid debit card can help you avoid unnecessary purchases and set responsible spending habits. There are many prepaid cards in the market right now, but these are definitely the best ones!

PREPAID VS. SECURED CARD

Although everybody knows how to compare a credit card and a debit card, not many people can explain the difference between a secured credit card and a prepaid debit card. So, here are a few tips to understand what you can do with these cards and how they compare.

What's a Secured Credit Card

This type of card allows you to borrow credit, but you need collateral for you to do so. This means that you need to make a deposit to the card issuer to use the card.

What's a Prepaid Debit Card

It's similar to a regular debit card because you don't borrow money whenever you use it. The trick is that with a prepaid debit card you load money onto the card beforehand. Then you use the available cash on the card.

The difference between both cards

There are three main differences between these two cards:

A) Credit Building Ability

If your aim is to build your credit history, then a secured credit card can definitely help! You may want to check if your card issuer reports the credit reporting agencies about your activity first.

On the other hand, the prepaid debit card won't help you with your credit history because you will only be using the money you deposit in your card to spend. That's why they are the ideal card to control your spending!

B) Initial Deposit

Regarding the initial deposit, when you open a secured credit card you need to deposit money as collateral before you use the card. This is a method used in case you can't repay your balance. Remember this doesn't mean that you won't be paying a bill every month!

In the case of the prepaid debit cards, you will be in charge of deciding the amount you want to initially put in your card. You will be able to reload it whenever you need more money in the account.

C) Application

To apply for a secured credit card you will have to go to a bank or a credit card company. The institution will check your credit history during the opening process. Once approved, you will have to make the deposit. It usually is between $300-$500 and it will set your credit limit.

Prepaid credit cards can be purchased whether online or in many stores. You will only need to set the amount of cash you are going to preload and then you are set!

D) Fees and interest rates

Before you get a secured credit card you may want to check the annual and processing fees and interest rates. They will vary according to the card. In the case of prepaid debit cards, you won't face any interest, but you may have high fees.

If you are trying to change your spending habits and save more money, then you should consider having a prepaid debit card. These can be used to make your purchases just as you do with any other credit or traditional debit card.

GO PREPAID!

The main difference is that with prepaid debit cards you will be in control of your balance, as you will have to load it onto the card before you spend it. When you get out of money, you won't be able to make any further spending. So, if you are interested in getting one of these cards, you can check the best options here!

Best prepaid debit cards of 2020

This card offers safety and security with the Brinks brand and protects you from unauthorized transactions. Among its main benefits, this card offers faster payments by using Brink's Direct Deposits and security. You will require card activation and identity verification, and terms and fees will be applied.

Bear in mind that this card has a higher monthly fee than other prepaid debit cards. However, if you choose the pay-as-you-go plan, you won't need to pay monthly fees, you will only be charged $1 per withdrawal and $2,50 per ATM withdrawal.

If you are looking for an understandable fee structure card, this is a great option! You can either pay as you go or make unlimited transactions with no additional fees. The great benefit of this card is that it doesn't count on overdraft fees on your purchases. Moreover, you can use the Netspend Mobile App to handle your card account.

This card count with 3 separate plans:

  1. Pay-As-You-Go - Only charges when using your card.
  2. Fee Advantage Plan - It has a $9.95 monthly fee and free unlimited transactions.
  3. Reduced Monthly Plan - It has a $5 monthly fee and free unlimited transactions.

Besides its peer-to-peer money transfer service, PayPal now offers a prepaid debit card. It's actually a great option to access your PayPal cash instead of waiting for it to get transferred to your bank. One of the great benefits of this prepaid card is that you can get personalized offers and even earn cash back by using it. However, bear in mind that it charges a $4.95 monthly fee.

It's quite easy to acquire this option and it's almost free to use. Issued by Metropolitan Commercial Bank, this card is quite a solid choice and it can be easily obtained by downloading the app and just opening an account. Your card will arrive within the following 10 business days.

Other highlights of this card are that it doesn't have any monthly fees and you won't pay fees for activation or inactivity. You can also withdraw cash for free from 6,000 ATMs across the country and will pay a $2 fee for withdrawing from an out-of-network ATM.

If you want an American Express card, this is a great option! It only has a few fees and plenty of reload options. Also considered a great card for families, this is a low-fee alternative to the traditional accounts.

It has a $6.95 monthly fee, but it can be waived if you use direct deposit and load $500 onto your card on a monthly basis. Moreover, you can load your cash for free at CVS and 7-Eleven stores! Regarding withdrawals from ATMs, you can do it for free at over 24,000 ATMs nationwide, so it's a considerably good option.

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