Why secured credit cards are better than prepaid cards.
Prepaid cards are a great alternative to paying with cash, offering the flexibility to make purchases like credit cards.
But prepaid cards aren’t credit cards. They work more like gift cards, requiring you to load funds in order to use them. They have no impact on your credit score, and they’re not without hidden fees.
Skip the prepaid card – build your credit instead
A credit card is an essential tool in your financial toolkit. It paves the way for future opportunities by building your credit history, which is recorded in your credit report. A glowing report appeals to future employers, qualifies you for loans and gets you that apartment in a sought-after neighbourhood.
Think of a secured credit card as a stepping stone. It’s your gateway to better options. Unlike prepaid cards, your bank or credit card provider reports activity on your secured credit card, such as your payment history and credit utilization, to the credit bureaus. This reporting is crucial because it ensures your responsible credit behaviour gets recorded and reflected on your credit score.
Think you’ll have trouble managing your credit? We’ve got you covered.
A Secured Mastercard from Capital One gives you access to our easy-to-use online banking app. Once you’re approved, you can set up alerts that notify you when statements are ready and payments are due.
Quick questions: Secured credit cards vs. Prepaid cards
What makes a secured credit card different from a prepaid card?
A secured credit card gives you a chance to use a credit card while learning the ropes of managing your credit. A prepaid card on the other hand has no bearing on your credit history. It’s like a gift card you load with money and use to make purchases.
Can you get credit from a prepaid card?
Nope. Prepaid cards don’t offer credit. You’re just spending your own preloaded money. Once you’ve spent all of your pre-loaded cash, you need to reload your card.
Why would I use a prepaid card?
It can be a convenient way to make purchases if you don’t have a bank account or credit history. The downside is that your purchases don’t count towards your credit history, because you’re not borrowing funds.
What’s the purpose of a secured credit card?
A secured credit card is a great tool for building or rebuilding your credit. It requires a security deposit as a form of collateral to show you’re committed to using your credit card responsibly.
Do I get my security deposit back?
Yes! With a secured credit card, your deposit is refundable after you close the account, provided you don’t have an outstanding balance.
Are security funds the same as annual fees?
No. Security funds and annual fees are easily confused, but they’re different. Check out this article to learn more.
Get answers to more questions about secured credit cards.
* If Quick Check pre-approves a card, you can be sure we’ll approve your application, except in limited circumstances. Some of the reasons we may not approve your application, among others, include:
a. There’s been a change in your credit file information, personal information or financial status from the time you receive your Quick Check results to the time you apply for one of our credit cards.
b. You’re not at least the age of majority in the province or territory you live in.
c. Your application is flagged for fraud prevention.
d. You have an existing Capital One account.
e. You’ve applied for a Capital One account in the last 30 days or had an account with us that was not in good standing in the last year. In good standing means not past due, over limit, fraudulent, restricted, or part of a consumer credit counselling program or bankruptcy.
In some cases, we may not be able to open an account for you even though your application was approved. This can happen if we’re unable to verify your identity, or you don’t provide the required security funds if you’re approved for a Secured Mastercard®.