For those who have difficulty qualifying for credit, or even for a bank account, the convenience of plastic seems out of reach. Traditional credit cards aren’t an option, and in some cases traditional debit cards aren’t an option, either.

This is where other financial products come in. The rising popularity of secured credit cards and prepaid debit cards offers a testament to the need for more accommodative financial options.

If you are thinking of rebuilding your credit with a secured credit card, or if you want an alternative to a traditional bank account, the products are available to you. However, it’s important that you understand the differences between secured credit and prepaid debit; otherwise, you might not get the right financial product for your needs.

Secured Credit Card

Everyone makes mistakes, and sometimes, in the financial world, those mistakes can lead to difficulty getting credit. When you can’t qualify for a traditional, unsecured credit card, you can usually qualify for a secured credit card.

A secured credit card is still a loan, but instead of simply relying on your promise to pay, the credit issuer requires you to provide collateral. In the case of a secured credit card, you usually have to deposit a certain amount of money in a special account. If you default on your line of credit, the lender can seize the money in the account and use it to pay off your debt.

For those looking to rebuild credit, a secured card can be a great help. Your payments are reported to the credit bureaus, so when you are careful to pay on time, your credit rating improves. It’s often possible to qualify for a “regular” unsecured credit card six to 12 months after opening a secured card and using it responsibly.

Prepaid Debit Card

A prepaid debit card looks a lot like a secured credit card. You have to put money in an account, and you can only access the money that you have deposited. You can use your prepaid debit card at terminals where credit cards are accepted.

However, a prepaid debit card is still a debit card. When you add money to your account, and behave responsibly, your behaviors will not be reported to the credit reporting agencies. A prepaid debit card will not help you improve your credit situation.

Instead, a prepaid debit card is ideal for someone whose past financial mistakes mean that they cannot qualify for a more traditional bank account. If you are having trouble qualifying for a “regular” checking account, a prepaid debit card can usually provide you with all of the conveniences of a checking account, including online bill pay and the ability to have your paycheck directly deposited to your card.

Watch Out For Fees

Whether you choose a secured credit card or a prepaid debit card, you need to watch out for fees. Both of these financial products often come with higher fees than their more desirable counterparts. For most consumers, these products are stop-gaps designed to help them out while they get back on their feet. The expenses often associated with secured credit cards and prepaid debit cards make them undesirable for long-term financial solutions.