Compare secured credit cards vs. prepaid debit cards

Get traditional flexible spending with less financial risk.

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Secured credit cards and prepaid debit cards are two of the most popular and available alternatives to credit cards. Both provide the same freedom as a credit card, but without the risk of falling into debt. They can be used to build credit, pay for everyday expenses or can be used as a stepping stone to an unsecured credit card. Here’s everything you need to know about secured credit cards and prepaid debit cards.

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  • No monthly fee with direct deposit
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Secured credit cards vs. prepaid debit cards

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

Secured credit cardsPrepaid debit 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 balanceMonthly 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

What is a secured credit card?

Secured credit cards offer the advantages of an unsecured credit card even if you have poor credit. The main difference between secured and unsecured credit cards is that secured cards require a deposit that often serves as your credit limit.

How do secured credit cards work?

Secured credit cards work similarly to unsecured credit cards. The primary difference is you’ll need to provide a security deposit in order to obtain a secured card.

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

When are secured cards better than prepaid debit 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 cards is that it helps you build your credit score as you use it.

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 debit cards.

Pros and cons of secured credit cards

ProsCons
  • High approval rates
  • Build credit with no risk of debt
  • Can be used anywhere
  • Refundable deposit that may earn interest
  • Flexibility in spending
  • Upfront deposit
  • Better cards may have lower fees
  • Low credit limits
  • Lack of rewards programs
  • Higher APR
  • Approval is not guaranteed

Compare secured credit cards

Name Product Filter values Purchase APR Annual fee Recommended minimum credit score
26.49% variable
$0
300
Get access to a higher credit line after making your first 5 monthly payments on time.
19.14% variable
$35
300
A secured Visa® credit card that helps you build your credit quickly.
9.99% fixed
$48
300
This secured card can help you rebuild your credit with an initial deposit of $200 to $1,000.
20.74% variable
$29
300
Build your credit with all three major credit bureaus.
13.99% fixed
$39
300
Open a personal savings deposit account to secure a credit line from $200 to $5,000.

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What is a prepaid debit card?

Prepaid debit cards are not linked to your bank account. Instead, you load money onto the card and once it runs out, you can either load more or get a new card. 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 debit card.

How do prepaid debit cards work?

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

  • Through a financial institution via cash, check or transfer
  • Direct-deposit paychecks onto your card
  • Online: PayPal, Interac or bank transfer
  • Reload it at a retail store like Walmart or Walgreens
  • Buy a reload card such as Vanilla, Green Dot or MoneyPak

Once your card is loaded, you can use it to make purchases anywhere you’d use a normal debit card. This includes goods and services at retail locations and even online bill payment for some cards.

Pros and cons of prepaid debit cards

ProsCons
  • Controlled spending
  • No overdraft fees
  • No credit check required
  • No bank account needed
  • No interest charges
  • Keeps your money safe
  • 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 debit cards better than secured credit cards?

Prepaid debit cards and secured credit cards are very similar in that they both provide a means to manage your spending. 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 debit cards encourage responsible spending and budgeting, and offer a secure way to manage your cash without a bank account. However, you’ll want to look for a low-fee prepaid debit card in order to cut back on the associated fees.

Compare prepaid debit cards

Name Product Signature transaction fee PIN transaction fee Monthly fee
$0
$0
$9.95 per month (or $0 with a $1,000+ direct deposit)
Customize your Visa prepaid card to fit you, and pick from two plans to fit your budget.
$0
$0
$9.95 per month (or $5 with a $500+ direct deposit)
Trusted by more than 7 million people.
$1
$2
$0
With Netspend, you get a convenient way to manage your money on a prepaid card that is packed with features.
$0
$0
$4.95
Use the no-cost direct deposit service and have access your funds up to two days faster than what traditional banks offer.
$0
$0
$4.95
Earn rewards towards free groceries and fuel savings. Choose between a Visa or Mastercard prepaid card. Plus, get a $10 bonus added to your reloadable card when you sign up for free direct deposit.

Compare up to 4 providers

Bottom line

If you’re looking to improve your credit, secured credit cards are often the best choice. However, if you’re just looking for a way to manage your finances, prepaid debit cards offer most of the benefits of a standard debit card without a bank account.

As with any major financial decision, you should always weigh your options to find a product that best suits your needs. Learn more about how credit and debit cards are different, or explore secured credit cards and prepaid debit card options, then apply for the card that’s right for you.

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