April 15, 2013

How to Choose the Best Card for People with No Credit

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Lacking a credit history and not sure what options you have? Luckily, a number of products on the market are aimed specifically at people with no credit. Most fall into one of two categories – prepaid debit cards or secured credit cards. Though these cards share a number of similarities, you’re likely to find that one is clearly a better choice for you than the other. Check out the tips below for more information to help you decide between the two.

Here are the factors you need to consider:

  • Know your main, long-term goal: Consider why you’re looking to get the card. Are you trying to build a credit history, or do you just want something that’s more of a pure alternative to cash? Only credit cards will help you build credit, so stay away from prepaid debit cards if that is your goal. Prepaid debit cards are better for people looking to either limit their spending or easily access money in an account.

  • Consider the cost: Most credit and debit cards available to people with no credit come with fees attached. These fees are usually annual or monthly charges just for the privilege of owning the card. In the case of debit cards, you could also have to pay every time you load money onto your card. Additionally, with a secured credit card, you’ll have to set aside some money in an account that you won’t be able to access while your card is active. The cost of these options – both upfront and ongoing – can really add up.

  • Decide how much protection matters: Credit cards in general offer more protection against unauthorized charges, so you’ll face less risk if your credit card is stolen compared to a prepaid debit card. Some prepaid debit cards provide some protection, but many do not. If your prepaid card is stolen, you could end up losing the money you had loaded onto it.

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