The Secured Credit Card Fantastic Plastic
If your credit’s a bit sketchy or maybe you just don’t trust yourself with a credit card and all its temptations, fear not! There’s a great alternative just for you and it’s called a secured credit card. A secured card might be just the ticket to stay out of debt and to improve your credit score along the way. Financial planner and teacher Rob West has the lowdown for you.
• Is there a difference between prepaid and secured credit cards? People often confuse the two because they work the same way to a point. In either case, they’re both just another way to pay for something. Instead of using a regular credit card, you can use either a prepaid or a secured card to make purchases online or in stores. They use the same payment networks and look just like a typical MasterCard, Visa, American express or Discover card.
• With both prepaid and secured cards you have to load money onto them first. But that’s where the similarities end. Nerdwallet describes it like this: a secured card is “buy now, pay later” while a prepaid card is “pay now, buy later.
• So is one better than the other? The secured version has the edge, at least for most folks who call into the program asking about this. A secured card can help you improve your credit score because the issuer is extending credit to you. That’s not the case with the prepaid version, so, it doesn’t affect your score.
• How should you best use a secured card to improve your score? You would want to make at least one purchase a month and then pay for it right away when you get your balance statement. When you do that, it will slowly establish your payment history and build your score. That’s why they’re great for young people just starting out.
• Make sure the card is one where the issuer reports your transactions to the credit bureaus. Ask about that ahead of time. Also, never attempt to spend more than your security deposit. The transaction won’t go through, and it could negatively affect your credit score.
• Is there a downside at all to a secured credit card? Well, you might have trouble renting a car with a secured card unless your security deposit is high enough. And of course you have to keep money on deposit. You don’t have use of it while the account is open, but that’s a small price to pay for the advantages.
Here are some questions we answered from our callers on today’s program:
• How abhorrent and anti-Christian does a company need to be before we avoid them and stand against them?
• What’s your opinion on gold?
• How far should I go with home repairs and improvements in order to sell my home?
Ask your questions at (800) 525-7000 or email them at email@example.com. Visit our website at moneywise.org where you can connect with a MoneyWise Coach, purchase books, and even download free, helpful resources.
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Featured Resources From MoneyWise
Author Art Rainer has managed to bring an entertaining element to learning about money management. A fun read for ages 8 – 12, this early-reader fiction provides math problems to solve and giving lessons to learn. It gives parents a solid foundation for talking about money principles and things kids like to be grossed out about, like used chewing gum and stinky body odor. Rainer even congratulates readers halfway through and rewards with unusual money facts. An excellent three-book series, The Secret Slide Money Club will bring fun and laughter as the agents race to save their friend from the stinky Albies, agents of Albatross, while learning how to Give, Save & Live God’s way! Request your copy with your gift of $25 or more to MoneyWise. Your generous donation helps expand our outreach to share God’s financial principles with others.