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Rebuild Your Credit Using Prepaid and Secured Cards 

Written by: Kristy Welsh

Last Updated: April 4, 2017

Do you need to rebuild your credit after a bankruptcy? Do you have bad credit and can not qualify for an unsecured credit card or loan? You are not alone! More and more Americans are seeing their credit scores plummet due to overwhelming debt and not being able to pay it back. Causes range from job loss or income reduction to having lost their entire nest egg or business in the Wall Street fall out. No matter what caused you to become further and further in debt, you can get back on your feet and rebuilding your credit is just one of the baby steps you will need to take.

Start to Rebuild Your Credit

If your credit history and/or credit score are suffering, getting an unsecured credit card or loan may be near impossible. So how do you rebuild your credit if you can't get any credit? It is a bit of a catch-22 but there are ways to build up your credit history so you can eventually get a loan. There are a lot of choices out there and you want to make sure you are going down the right road. A wrong choice could cost you more money in the long run and when it is all said and done, it did nothing to better your situation. Two of the most popular cards right now are prepaid cards and secured credit cards. Keep reading and we will show you the pros and cons of each so you can make an informed decision before you apply for one or the other.

Using Prepaid Cards

In a nutshell, this is how a prepaid card works. You make a monetary deposit onto the card which goes into your card account. When you use this card for purchases, the purchase is immediately deducted from your balance. Once you spend up to your deposit, you will need to reload it again by making a deposit into your account. Having said that, here are the pros and cons of a prepaid card.


  1. No approval process
  2. You can't get into debt
  3. Helps with budgeting
  4. No interest


  1. You don't build credit
  2. Not accepted everywhere
  3. Less consumer protection
  4. Fees can be high

Using Secured Credit Cards

A secured credit card requires you to make a cash deposit, typically $200 to $5,000, with the card issuer before you can use the card. Hence, your credit limit is equal to the amount of your deposit. The bank then holds your deposit as "security" in the event you fail to pay your credit card bill. So, you can make purchases up to your credit limit and then at the end of the month, you will get a monthly statement and you are required to make a monthly payment, just like an unsecured credit card. Here are the pros and cons of a secured credit card.


  1. No approval process
  2. Helps improve credit score
  3. Accepted everywhere
  4. Will usually convert to an unsecured card wtih timely payments


  1. Some do not report to all three credit bureaus
  2. Many have high fees
  3. Ties up a large sum of your money

Which Card is Best For You?

If you want to improve your credit score, say after a bankruptcy, a secured credit card is the one for you. Make sure the card you choose reports to all three credit bureaus and the issuer will convert the card to an unsecured card after 12 to 18 months of timely payments.

A prepaid card is right for you if you want to avoid banks and use this card instead of a checking account. Many employers will direct deposit your paycheck into a prepaid card. Just make sure to read the fine print when applying for one of these cards. There are a lot of them that will nickel and dime you to death with fees.