What Is A Secured Credit Card?

A secured credit card may also be known colloquially as a prepaid credit card.  A secured credit card is not linked to a bank account and the card applicant must pay a deposit which acts as security against non-payment.  Secured credit cards require a credit check and credit approval by the card issuer but, because of the security deposit, the conditions may be more lax than those required by an unsecured credit card.  Responsible use of a secured credit card can help to build a credit rating and is often used by those with poor or limited credit histories.

What Is A Prepaid Debit Card?

A prepaid debit card is linked to a bank account.  Its spending is limited by the amount of funds available in that account unless there is an overdraft available.  Using the overdraft will typically incur a fee and the amount of the overdraft used will accrue interest until it has been repaid.  There is no credit check or credit approval needed to receive a prepaid debit card and its use has no effect on the user’s credit rating.

What Are The Differences Between Secured Credit And Prepaid Debit Cards?

A secured credit card involves providing a security deposit to allow access to a revolving line of credit.  When charges are made on the card, money is being borrowed and will accrue interest if the balance is not repaid by the due date.  A secured credit card requires a credit check and its use will affect the user’s credit rating.

A prepaid debit card, on the other hand, uses money that has already been deposited into a linked bank account.   Repayment is not required unless the user wishes to continue using the card once the funds are depleted. Card use or misuse has no effect on the user’s credit rating.

The Emburse Expense Management System

The Emburse expense management system allows for the implementation of both secured credit cards and prepaid debit cards.  If you would like to learn which card system would work best for your business, get in touch for a free demo today.
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