Canadian Prepaid Credit Cards can be used much like a regular credit card in the sense that you don't need to bring cash to make a purchase. These cards usually have a Visa or Mastercard logo on them so they can be used to buy goods or pay for things at merchants and establishments where credit card payments are accepted. A prepaid credit card can also be used to shop from the internet. What makes it different from a secured credit card?
What are Prepaid Credit Cards?
Providers of prepaid credit cards do not check credit history. Regardless of your credit rating, you can apply for a prepaid card and get approved with no questions. However, prepaid card companies don't include credit reporting to the major credit bureaus (Equifax Canada or TransUnion Canada). Therefore, if you want to build your credit history, a prepaid card may not be the best tool to help you. This type of card is not attached to your bank savings account either. In order to use the card, you must first deposit funds to your prepaid card. If you put $300 in your prepaid account, you can use the card as long as you have a remaining fund enough to make another purchase. Whenever you've used up your balance, you'll need to deposit cash again before using it.
The good thing about using this type of card is that it eliminates the risk of bad debt. Since your purchases will be paid using the cash you've deposited in your card, there's no need to submit your payment at a later time. Also, you will not incur any interest rate or additional charges.
What are Secured Credit Cards?
As a secured credit card holder, you can enjoy a credit line like all other credit card holders. This means, you can charge purchases to your card and pay for them at a later time as long as you don't exceed your credit limit. You are also given a grace period- or a period of time where you can pay off your balances without being charged with additional interest costs.
Consequently, if you fail to pay your balances in full within your repayment period or if you choose to carry over your balance for the next month, you will incur the interest rate cost in your account. Secured credit card holders are also required to submit a security deposit in their accounts. The amount of your deposit will often determine the value of your credit limit. Nevertheless there are cards for bad credit that offer credit lines that are slightly higher than the required security deposit.
Many people choose to get a secured credit card because of their poor credit history. If you live in Canada, check your credit report and see if you'll qualify for Canadian credit cards that require excellent or good credit. If not, you can consider getting a Canadian secured credit card instead.
This type of card is ideal for people who want to establish credit history or rebuild bad credit history. Unlike prepaid, secured credit card companies will report your payment to the major credit bureaus like Equifax Canada and TransUnion Canada. Thus, as you use your card and as you stay consistent with your payments, you can improve your credit score one step a time.
Parents have to face the arduous task of seeing their beloved children leaving to make their own way in adulthood. You have raised your children and prepared them as well as you knew how and now it is time to let them experience the joys and sorrows of college. Even though they are old enough to build their own credit card credit rating, they still may need some extra help. A student loan only goes so far and you do not want to worry about them racking up a huge student credit card debt. The solution is prepaid credit cards.
What Is A Prepaid Credit Card?
Prepaid credit cards are very similar to unsecured credit cards and can be used anywhere bank credit cards, MasterCard or Visa credit cards, or debit cards can be used. The difference is that the prepaid card acts more like a debit card. You deposit money into the account and your child can only use that amount. There is no need to worry about them going over the limit and you can track how much money they are spending on a monthly basis. An additional bonus is in knowing that your child is learning how to manage their money.
Why Is Prepaid Credit Card A Better Choice?
So why use a prepaid credit card instead of bank credit cards? The first reason is that a bank credit card can exceed the balance in the checking account if it is linked to the account. This can cause over limit fees to rapidly accumulate. A bank credit card, if it is not tied to the checking account, is reliant upon credit scores. If your child has not established a credit rating, then he or she can be turned down. Each time a lender runs a credit card application, the credit score can be harmed and lowered. This perpetuates the cycle of applying and then the subsequent denial, based on the credit scores.
The Benefits of Prepaid Credit Cards
The benefits to using prepaid credit cards are many. You do not have to worry about monthly payments. You decide how much they can spend in a month and it teaches the student the benefits to using and spending money wisely. It may not help them build their credit score, but it can certainly protect them from going into debt. You are helping your child learn fiscal responsibility without worrying about receiving calls from bill collectors.
Both Liz Roberts & Keith Lee are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Liz Roberts has sinced written about articles on various topics from Debts Loans, Credit Cards and Apply for Credit Card. Copyright 2009 New Horizon Business Services, Inc NHBS, Inc has been providing consumers and business owners with financing since 1989. Join our mailing list for. Liz Roberts's top article generates over 22200 views. to your Favourites.
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