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Compare secured credit cards vs. prepaid credit cards

Both provide the same freedom as a credit card, but can help keep your spending under wraps.

Credit cards are one of the best ways to build up your credit score, and when used responsibly, can provide flexibility in your path to financial stability alongside affordable types of financing when you need access to them in the future. While there are all sorts of benefits that come with owning a credit card, there are also a handful of downsides. Whether you’re having trouble getting approved or you just want to avoid the risks that come with regular credit cards, there are a number of other financial products that serve a similar purpose.

Secured credit cards and prepaid credit cards are two of the most popular and available alternatives to credit cards. While both of these cards provide the same freedom as a credit card, they don’t come with the added risk of falling into debt like credit cards do. They can be used to build your credit score, pay for everyday expenses or even as a stepping stone to an unsecured credit card.

Learn more about secured credit cards and prepaid credit cards in our guide below and discover which may better suit your spending habits and financial needs.

What is a secured credit card?

The main difference between secured and unsecured credit cards is that secured cards require a deposit that serves as your credit limit. For example, if you have a $1,000 deposit on your card, your credit limit will be $1,000. Secured credit cards still offer many of the same advantages as unsecured credit cards.

Unsecured credit card issuers rely on your credit history as assurance that you’ll pay off your purchases, whereas with secured cards, your deposit acts as collateral. Secured credit cards are easier to be approved for — especially for those with limited credit histories or poor credit.

Compare secured credit cards

1 - 4 of 4
Name Product Min. Required Deposit Purchase Interest Rate Cash Advance Rate Annual Fee
Neo Secured Card
19.99% - 26.99%
Earn bonuses like 15% cashback on your first purchase at most partners, and earn an average of 5% cashback at thousands of partners and at least 0.5% cashback guaranteed.
Home Trust Secured Visa (No Annual Fee)
The no annual fee Home Trust Secured card comes with a standard 19.99% purchase and cash advance rate. Apply with any credit score and start rebuilding your credit.
Home Trust Secured Visa (Low Rate)
Rebuild your credit score and enjoy a low purchase interest rate of 14.90% and a cash advance rate of 19.80%.
Home Trust Secured Visa (Low Rate & Monthly Fee)
Pay a monthly fee of $5 and get a low purchase interest rate of 14.90%.

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Learn more about secured credit cards in our guide here.

How do secured credit cards work?

You can use a secured credit card anywhere that accepts credit cards — online or in person — and you’ll receive a monthly statement with your balance. You can usually opt for paper or electronic statements. You’ll see a required minimum payment every month, but you’ll pay interest on any outstanding balance. Making timely payments and staying within your credit limit will help you build up your credit score over time. Conversely, failing to make repayments on time will damage your credit score.

When are secured credit cards better than prepaid credit cards?

Secured credit cards allow you to use the lender’s money on credit with the promise to pay it back later. The greatest advantage secured cards have over prepaid credit cards is that it helps you build your credit score as you use it, whereas prepaid credit cards do not.

Secured credit cards also offer more flexibility in your spending, and some offer rewards programs, benefits and other perks that aren’t available on prepaid credit cards.

Pros and cons of secured credit cards


  • High approval rates
  • Build credit with no risk of debt
  • Can be used anywhere
  • Refundable deposit that may earn interest
  • Flexibility in spending
  • Keeps your spending under wraps


  • Upfront deposit
  • Better cards may have lower fees
  • Low credit limits
  • Lack of rewards programs
  • Higher APR
  • Approval is not guaranteed

What is a prepaid credit card?

A prepaid credit card is a card that you load money onto and once it runs out, you can either load more or get a new card. These cards are not linked to your bank account and therefore do not affect your credit score. There are no credit limits, monthly bills or interest charges like a credit card, but you’ll still be able to use it anywhere you’d use a standard credit card.

While prepaid credit cards are called credit cards, they are more like debit cards since you can’t access a line of credit.

How do prepaid credit cards work?

Unlike standard debit cards and credit cards, you won’t need to go through a financial institution like a bank or a credit union in order to get a prepaid credit card. Prepaid credit cards can be purchased at grocery stores, pharmacies, corner stores and a handful of other locations, making them much easier to get your hands on. Once you’ve obtained a card, there are a number of ways you can load money onto it:

  • Through a financial institution via cash, cheque or money transfer.
  • Direct deposit your paycheques onto your card.
  • Online: PayPal, Interac or bank transfer.
  • Reload it at a retail store like Walmart or Shoppers Drug Mart.

Once your card is loaded, you can use it to make purchases anywhere you’d use a normal credit card.

Compare prepaid credit cards

1 - 4 of 4
Name Product Monthly Fee Cost per transaction Foreign transaction fee Rewards Feature
KOHO Prepaid Mastercard (KOHO Easy)
1% cash back
Use promo code FINDERCODE and receive a $20 cash bonus into your KOHO balance once you make your first purchase within 30 days of signing up.
Earn 1% cash back on groceries, billing and services. Plus, earn 0.5% interest on your entire balance.
EQ Bank Card
2.50% interest, 0.5% cash back
Get 2.50% interest on your money and get 0.5% CashBack on every purchase.
CIBC AC Conversion Visa Prepaid Card
1% cash back
Load up to 10 different currencies with 1 card, earn 1% cash back on all spend and avoid fees.
KOHO Premium Prepaid Card
$9/month or $84 annually
Up to 2% cash back
Use promo code FINDERCODE and receive a $20 cash bonus into your KOHO balance once you make your first purchase within 30 days of signing up.
Earn 2% cash back on groceries, transport, eating and drinking, and 0.5% cash back on all other purchases. Plus, earn 2.00% interest on your entire balance.

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Pros and cons of prepaid credit cards


  • Controlled spending
  • No overdraft fees
  • No credit check required
  • No bank account needed
  • No interest charges
  • Keeps your spending under wraps


  • Doesn’t build credit
  • No rewards programs or benefits
  • Undisclosed service charges
  • Activation, withdrawal and deposit fees
  • Limited online purchases
  • Less security if lost or stolen

When are prepaid credit cards better than secured credit cards?

Prepaid credit cards and secured credit cards are very similar in that they both provide a simple way to keep your spending under wraps while avoiding debt. While secured credit cards offer more flexibility in your spending, they may promote bad habits since you aren’t actually spending your own money. Prepaid credit cards encourage responsible spending and budgeting, and offer a secure way to manage your cash without having a bank account.

Secured credit cards vs. prepaid credit cards

While secured credit cards and prepaid credit cards may seem very similar in theory, there are actually several major differences. Here are a few of the main features that separate the two:

Secured credit cardsPrepaid credit cards
Deposit is collateral and your spending limitDeposit is your spending limit
Annual, transactional and maintenance feesActivation, withdrawal and deposit fees
Interest charges on monthly balancePossible monthly service charges
Build credit as you use the cardDoesn’t build credit
Funding through bank accountMultiple funding options
Can be used almost anywhereLimited online use and access
Interest and fees on cash advancesATM balance inquiry fees
Rewards programs and card benefitsGuaranteed approval
Only available through financial institutionsNo bank account required

Bottom line

While there are a handful of financial products that can help you better control your spending, secured credit cards and prepaid credit cards are among the best. If you’re looking to improve your credit score, secured credit cards are the best choice. However, if you’re just looking for a way to manage your finances and avoid debt, a prepaid credit card may be the way to go.

As with any major financial decision, you should always weigh your options to find a product that best suits your financial needs and spending habits. Consider both secured credit card and prepaid credit card options, then apply for the card that’s right for you.

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