InvestorQ : I am a fresher and don’t have the required credit for banks to give me a credit card. Which card should I then apply for- a prepaid credit card or a secured credit card?
Kunal Verma made post

I am a fresher and don’t have the required credit for banks to give me a credit card. Which card should I then apply for- a prepaid credit card or a secured credit card?

Answer
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Anusha Savla answered.
2 years ago


Welcome to the world of personal finance. I laud your efforts in trying to take informed financial decisions this early on in your life.

Let’s first understand what both these cards are:

Prepaid credit card

A prepaid credit card is a credit card that’s more similar to a debit card in its features as it doesn’t allow a user to use credit he/she doesn’t own.

Investopedia defines a prepaid credit card as: a secured card issued by a financial institution that has been secured with a prepayment. These cards can be compared to prepaid debit cards which use preloaded funds for transactions.

Prepaid credit cards are cards that can be used by those individuals who either don’t have a good credit score or don’t have enough credit profile to get a credit card.

Secured credit card

Anything ‘secured’ in the financial world means that it has some collateral attached to it. Just like secured loans are loans that have collaterals attached such as say a house or an automobile, etc. a secured credit card is a card that has the collateral of a fixed deposit attached to it.

Bills generated from the credit card, such as the minimum amount due or the late payment charges get deducted from the fixed deposit linked to the secured credit card if the card holder doesn’t pay the dues.

Secured credit cards help an individual create a good credit history.

As can be understood, both the cards are technically for those individuals who may not get a normal credit card due to either poor credit score or insufficient credit history. Thus, for you, I would advise opting for a secured credit card as it will help you build your credit history and this will help when you need to take a loan in the future or take credit cards with better offerings.