Secured cards vs. prepaid cards – what’s the difference?
So you’re ready for a credit card, and you’re exploring your options. You may come across a secured card you’re interested in, but you might be wondering if it’s any different from the prepaid cards you’ve been coming across in your search. It is.
Many people think that secured cards aren’t real credit cards – on the contrary. Secured cards work like any other credit card, except they require security funds as collateral. A prepaid card is just that – a card that you preload with the funds that you plan to spend, kind of like gift cards.
We compare the Capital One Guaranteed Secured Mastercard with prepaid cards below.
Secured cards.
A great option if you’re new to credit, or looking to rebuild your credit.
Allows you to build your credit score when used responsibly – remember to make at least the minimum payment on time each month but try to spend within your means, because you’re charged interest on any unpaid balance.
We report your account activity to credit reporting agencies every month.
Comes with an annual fee, as well as other fees.
Prepaid cards.
Requires you to preload with the funds you plan to spend.
Offers the flexibility of making purchases without having to worry about monthly payments and interest charges.
Won’t help you build your credit history because your activity isn’t reported to credit reporting agencies.
Gives you the freedom to make purchases until you’ve used up your funds.
May come with certain fees like activation and inactivity fees.
If you’re interested in building your credit and you’re in the market for a secured card, check out the Guaranteed Secured Mastercard® from Capital One.