Can a Prepaid Debit Card Help Your Credit Score?

If you want to build your credit, a common dilemma is you need a good credit to get a credit card. If you’re a student, you’re in luck because you can typically apply for a student credit card and start building your credit profile. Otherwise, getting a credit card to build your credit could be a challenge if you have a poor credit. To make the matter more confusing, the credit card industry introduce new products, such as prepaid debit cards and secured credit cards to the mix.

Prepaid Debit Cards

You may have heard that a prepaid debit card is a good alternative to a real credit card if you have bad credit or no credit at all. Although it’s a good alternative, using a prepaid debit card does not help you build your credit. Prepaid debit cards work like debit cards, and unlike traditional credit cards.

Money charged to a traditional credit card is a loan where you are extended a certain amount of credit that you must repay — your usage and repayment activities get reported to the credit bureaus. On the other hand, you are using your money that you added to the card when you use a prepaid debit card.

In any case, prepaid debit card does offer you the convenience of a credit card, and if you’re interested in getting one, you can check this list of free prepaid debit cards.

Secured Credit Cards

On the other hand, a secured credit card can help you build your credit — whether to establish your credit, or improve bad credit.

A secured credit card is similar to a prepaid debit card in a sense that you make a deposit into an account. The difference is that your purchases are not deducted from your account balance, instead the money for your purchases is loaned to you and you must repay your loan the same way you do a credit card.Your account simply acts as a collateral that the back can seize in case you do not repay your loan. This is why it’s called a secured credit card and why it could help improve your credit score.

About the Author

By , on Apr 6, 2010
Andy Tenton
Andy is a 30-something New Yorker who turned his financial life around. He took charge of his finances, got out of debt, and is now working his way toward financial success. He is the owner and publisher of WorkSaveLive.com.

Credit Score Ratings Chart

Credit Score Description
750+ Excellent
700 - 750 Good
640 - 700 Average
580 - 640 Poor
below 580 Bad
see your credit score now

Leave Your Comment (One Comment)

  1. A few legitimate companies offer great secured credit cards and report every month. They can boost your credit score enough for you to obtain an unsecured credit card.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

Disclaimer

The information on this site is strictly the author's opinion. It does NOT constitute financial, legal, or other advice of any kind. You should consult with a certified adviser for advice to your specific circumstances.

While we try to ensure that the information on this site is accurate at the time of publication, information about third party products and services do change without notice. Please visit the official site for up-to-date information.

For additional information, please review our legal disclaimers and privacy policy.

Notice

Moolanomy has affiliate relationships with some companies ("advertisers") and may be compensated if consumers choose to buy or subscribe to a product or service via our links. Our content is not provided or commissioned by our advertisers. Opinions expressed here are author's alone, not those of our advertisers, and have not been reviewed, approved or otherwise endorsed by our advertisers.