prepaid credit cards

A prepaid credit card account is opened by depositing money into that account, much in the same way you would make a deposit to open a checking or savings account. Once you have money in your account, you're issued a prepaid credit card that can be used anywhere one would use a regular credit card. The best part of the prepaid credit card is that you can charge to your heart's content and you won't be in debt. The money is yours and once it's gone, you can't spend any more until you make another deposit. There are no bills and no interest charges. It's the same principle as using a debit card linked to a savings or checking account.

So what's the catch? First, you'll have to pay a fee to set up your account. The amount varies, but you can probably expect to pay about US$5 to $10 to open a prepaid credit card account. In addition, you'll have to pay additional fees every time you deposit more cash into your prepaid credit card account. For those with bad credit, the benefits of a prepaid credit card far outweigh the risks. They're able to reserve rental cars or hotel rooms, and don't have to worry about credit card bills and interest payments later.

Those who are planning to use the prepaid credit card to pay for a monthly Internet subscription, or to purchase an item where a fixed amount is deducted from their card each month, might be dismayed to learn that this might not be possible. Many of these businesses don't want to do business with a prepaid credit card because there's always the risk that there won't be any money in the account when it comes time to pay the bill.

secured credit cards

A secured credit card is a wonderful way to get your feet wet in the world of credit.Regular credit cards are called "unsecured," because there's no collateral backing up the line of credit.With an unsecured credit card, the bank allows you to borrow up to your credit limit without any guarantee that the money will be repaid.

A secured credit card, on the other hand, is tied to collateral held in a bank account. In other words, your credit limit equals your checking account balance or another amount required by the card company -- although payments for purchases made with this card won't be drawn from your bank account. If you have $500 in the bank, then your credit limit for the card is $500. If you try to charge more than $500 on the secured card, the transaction simply won't go through.

The cool thing about secured credit cards is that you can use them as training wheels for an unsecured card. Most secured credit lenders -- credit unions are excellent choices will let you graduate to an unsecured credit card after 12 to 18 months on a secured account.

Be careful, though: Some secured credit cards carry higher interest rates and fees. Above all, make sure that the secured lender reports to all three major credit bureaus. That's the only way you'll build a healthy credit history