Will a Prepaid Debit Card Improve Your Credit Score?

There’s a lot of buzz right now about the release of Suze Orman’s Approved Card. This prepaid debit card has a lower monthly fee than most other prepaid debit cards, but it still charges you for accessing your own money, and charges a host of other fees besides.

One of the things that does make the Approved Card substantially different from other prepaid debit cards, though, is the fact that the information on your spending habits is going to be reported to TransUnion. While this is a great marketing move, and Orman is talking it up as part of her “revolution” to change the way credit is reported, in practical terms this report means nothing. The information sent on to TransUnion is going to be evaluated to see if such data could be useful in the future, but it won’t do anything for your credit score right now.

Prepaid Debit Cards Won’t Improve Your Credit Score

In recent years, with the proliferation of prepaid debit cards and prepaid credit cards, it can be easy to become misled and think that your prepaid debit card is going to help you improve your credit score. However, it’s important to understand the distinction. Your prepaid debit card is not a credit card product. Prepaid debit doesn’t require you to make regular payments. All you are doing is spending your own money.

If you are looking for a way to improve your bad credit score, and you can’t get credit through a bank or an unsecured credit card, you might want to consider a secured credit card. These are actual credit products, and your regular payments will be reported to the credit bureaus and help your credit score.

However, it’s vital that you not become confused when comparing these financial products. Prepaid debit cards and secured credit cards appear similar at first glance. They both operate as you expect plastic forms of payment to act, and they both require that you pay money up front to use the card. And both financial products charge fees.

When you sign up for one of these cards, you need to consider what you need it for, and you need to make sure that you understand the differences between the two cards. If you sign up for a prepaid debit card — no matter what sort of “anonymous data” is going to a credit bureau — it’s not going to help your credit score. It just isn’t. If you are trying to rebuild your credit, a prepaid debit card isn’t going to help. You’re just going to pay fees to access your own money.

Eventually, with good financial behavior, a secured credit card turns into an unsecured card. You can raise your limit, and get a card that will help your credit score even more. If your credit really is that bad, a secured credit card, though loaded with fees, can help you repair your credit and build a better history in a way that a prepaid debit card never could. No matter who’s shilling for it.