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Difference between Prepaid and Secured Credit Cards

Although prepaid cards look like and are used just like credit cards, they really are more like debit cards. Your credit line depends on how much money you transfer to the card, and it decreases each time you make a purchase. In other words, with a prepaid card, you don’t really have a line of credit, you can only spend the money you have in your account.

In contrast, with a secured card, you make a one-time security deposit in a bank account, and then make monthly payment on your card as you would on a regular credit card. The deposit is only drawn down if you default on your payments. In addition, if you maintain a regular payment history, the card issuer will often reward you by increasing your credit line without requiring you to add to your security deposit.

For those of us with 'less than perfect credit', a secured, unsecured or prepaid credit card may be the answer. Any of these cards will certainly give the flexibility of having a card to shop online and give peace of mind by not having to carry cash anymore. A few of these options will even help you rebuild or establish your credit. The key is to read the fine print and not apply for a card that is going to charge excessive fees.

Shopping and Catalog Credit Cards

Most of these credit cards do not charge an annual fee, however you need to make sure by reading the terms and conditions with detail so you are not tricked into onerous financial products. If there are high charged you should not signed and if you’ve already done so, you can always request cancellation of your account which is advised for high cost financial products like this.

Source: Department Stores or Catalog Companies

Each store or company offers a different credit limit and minimum payment just like any issuer. The credit card is a closed credit card and can only be used for purchasing goods at that specific store. This type of credit card usually offer a higher interest rate than traditional cards and thus, you should avoid the use if you don’t plan to pay the balance in full or if there no specific no interest rate promotions.

Aside from convenience, catalog credit cards also often offer rewards for using it to pay for your purchases at their store. For example, Gap, Old Navy and Banana Republic all offer great spending rewards and most department stores also offer an immediate discount when you first apply for their credit card.

Remember though that too many credit cards or open lines of credit do no show up good on your credit report and can be the cause of loan rejection due to a high debt to income ratio. In order to avoid this, get only the catalog credit cards you need and stick to a traditional credit card instead so you can pay at other stores.

Improving Credit Score

Nevertheless, carrying a small balance on department cards and using them regularly while repaying on time the balances will contribute greatly to improving your credit history and thus boosting your credit score to new heights. A good credit score can be easily achieved with a year of timely payments on your bills and credit card balances.

This doesn’t mean say that you should enroll for every catalog or department store credit card available to you. Avoid credit cards with high interest rates or those that do not offer rewards because these cards do not offer anything more that regular credit cards do at more reasonable interest rates and with additional benefits.

The most important benefit that these cards feature is that qualification for a store or catalog credit card is a lot simpler. There are no harsh credit requirements or income requirements. There are some companies that will establish the customer reliability by analyzing only in their own database how much the client consumes every month and consequently, the credit limit is fixed making use of this information. Thus, the company runs no credit checks or other time consuming credit verification processes and offers a credit card to someone with bad credit provided that they have purchased enough goods to make the offer suitable.

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