With the holidays just around the corner, you will probably see some ads and articles about holiday prepaid debit cards. Prepaid debit cards are marketed to individuals and families with less income or poor credit as a way to complete their holiday spending without going over budget. The amount of money you have on the card is the same amount of money you prepay into your account. Therefore, the prepaid debit card industry will argue that it is a viable way to control your spending and ensure you don't go into the negative on your bank accounts or above the limit on your credit cards.
There's one big problem with prepaid debit cards. You are not actually building credit. Unlike unsecured and secured credit cards, prepaid debit cards do not report to the three major credit bureaus, so there is no record of your spending. Since many of the people who have bad credit are the ones being targeted for prepaid debit cards, it doesn't make sense that they purchase a card that won't help them improve their situation.
Then there's the problem of fees. Prepaid debit cards are known for their very high fees for a number of different events. There are fees for ATM withdrawals, opening an account, closing an account, pin transactions, balance inquiries, and more. Although prepaid cards may help you spend less, you'll have to spend more in fees than you would using other forms of payment.
One of these other forms of payment is a secured credit card. Those with bad credit or who are looking to rebuild their credit may want to take a look at what secured credit cards are available to them. Unlike prepaid debit cards, secured credit cards do report to the three major credit bureaus, so smart spending and payments will help you get back on track. Because secured credit cards require a deposit to establish your balance, they are much less of a risk for banks that issue them. Therefore, they are easier to get approval for than unsecured credit cards.
If you have made poor spending decisions in the past, don't feel alone. We have all been there, especially around the holidays. However, there's always time for a second chance. Just remember that some tools are better than others to help you succeed in your goal. When it comes to controlling spending and rebuilding your credit, secured credit cards clearly have the advantage.
There's one big problem with prepaid debit cards. You are not actually building credit. Unlike unsecured and secured credit cards, prepaid debit cards do not report to the three major credit bureaus, so there is no record of your spending. Since many of the people who have bad credit are the ones being targeted for prepaid debit cards, it doesn't make sense that they purchase a card that won't help them improve their situation.
Then there's the problem of fees. Prepaid debit cards are known for their very high fees for a number of different events. There are fees for ATM withdrawals, opening an account, closing an account, pin transactions, balance inquiries, and more. Although prepaid cards may help you spend less, you'll have to spend more in fees than you would using other forms of payment.
One of these other forms of payment is a secured credit card. Those with bad credit or who are looking to rebuild their credit may want to take a look at what secured credit cards are available to them. Unlike prepaid debit cards, secured credit cards do report to the three major credit bureaus, so smart spending and payments will help you get back on track. Because secured credit cards require a deposit to establish your balance, they are much less of a risk for banks that issue them. Therefore, they are easier to get approval for than unsecured credit cards.
If you have made poor spending decisions in the past, don't feel alone. We have all been there, especially around the holidays. However, there's always time for a second chance. Just remember that some tools are better than others to help you succeed in your goal. When it comes to controlling spending and rebuilding your credit, secured credit cards clearly have the advantage.