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A better option than a prepaid card

Question: I have a lousy credit score and am taking steps to improve it. In the meantime, I need to get a prepaid credit or debit card so I can pay for things like airfares, rental cars, hotel reservations, etc. Can you suggest the best prepaid card to go with? My initial Internet search for said cards resulted in a headache trying to figure out if these companies were a good deal or just a consumer nightmare. Any help is greatly appreciated. Mark, Duluth, MN 

Answer:  I would steer clear of prepaid credit cards. They aren't a good deal for most people (high fees, etc.) and the activity on a prepaid card isn't reported to the various credit bureaus. A prepaid credit card doesn't improve your credit score. 

A good tactic for anyone working toward boosting a poor credit score is to take out a "secured" credit card. The basic idea is that you open up a special savings account with a bank or credit union. Your credit limit on the card is equal to or somewhat less than the amount on deposit. A majority of banks and credit unions offer customers the option of a secured credit card.

Eventually, after you've paid the secured credit card bill on time for a certain period, you should qualify for a traditional (unsecured) credit card.

When it comes to secured credit cards, it pays to shop around. The minimum requirements and other terms vary a lot. Secured credit cards also come with higher fees than regular credit cards. You can get information on rates and terms of secured credit cards at Bankrate.com and Cardhub.com 

About the author

Chris Farrell is the economics editor of Marketplace Money.
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