Secured Credit Cards, Pre-Paid Credit Cards
Secured credit cards are another name for pre-paid credit cards.
It works like this: someone starts a savings account with a bank or credit union. They get a secured credit card against the amount of money in the account. So you would put $300 in the account, and then have a secured credit card that has a limit of $300.
Every month you pay the balance you owe. There are still interest charges on the amount of your purchases, even though the credit card is pre-paid. And ATM fees may still be applied. Like any credit card, know the interest rate before you fill out the application. Some pre-paid credit cards also have very high interest rates.
And people with pre-paid, or secure, credit cards are sometimes charged a fee just for depositing more money on the card. Do not get a pre-paid credit card that does this. It is a rip-off.
It can be an excellent way to build up your credit.
Secured Credit Cards Popular With Millennials
Young adults were forming their spending habits during the 2008 financial meltdown. The data shows that Millennials are avoiding credit cards to a much larger degree than their older relatives.
“Millennials represent 45% of all prepaid debit cards,” says K. Alexander Ashe, CEO of Spendology, in Washington, D.C. “It’s really significant that the percentage of Millennials embracing prepaid debit cards is so high. It signals a rejection of conventional fee-for-service banking. Prepaid debit cards give Millennials more control, lower costs and higher certainty of expected costs.”
If you are having problems with debt, credit cards or have questions about bankruptcy, phone Axsmith Law LLC at (202) 285-5415.