Secured Credit Cards – Prepaid Credit Cards – High Interest Cards – Which Should You Choose
The choice, of course, depends upon the purpose of the card.
If you are getting the card for the purpose of building your credit, get a secured card or a high interest card. If you wish to give a gift, get a prepaid card.
Secured credit cards are treated just like unsecured cards in the eyes of the credit bureaus, and your balances and payment record will count toward building a credit score. Prepaid cards are not reported at all, so are not a tool in building credit.
The choice of a secured card or a high-interest credit card might depend upon your cash on hand or the help available to you.
A secured credit card is a tool that enables a relative or friend to help you build your credit without risking their own. If you don’t have the cash available to set up a secured account, they can make a loan to you for the amount needed to deposit in the secured account.
Once you establish a good record of minimal use combined with prompt payment, your own credit scores will rise and you’ll be eligible for a low risk, lower interest card of your own. At that time, the secured account can be converted to an unsecured account, and the deposit will be returned to you, with interest. Then you can repay the relative or friend who helped you.
Of course, as with any credit card, running the balance too high or failing to make every payment on time will have a reverse effect – it will lower your credit scores.
If you have no one to offer this kind of assistance, consider getting a high-interest card and using it so wisely that you’ll soon qualify for a lower interest card. Some of these cards do require an annual fee, and that fee varies widely from card to card, so read all of the offers carefully. Don’t automatically assume that the best card is the one advertised in that offer in your mailbox. In all likelihood, that is the worst one!
Because they are all high interest, plan to use the card very little and pay the balance in full each month. Use it for a purchase you would have made anyway – such as a bag of groceries. Be sure to stay under 10% of your available credit and mail your payment the same day the statement arrives in your mailbox.
