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I was reading about different factors that determines credit score. One of them is having a "good credit mix" (IE having a healthy mix of secured (such as home loan, auto loan) and unsecured loans (such as personal loan, credit cards)).

So, I want to know whether prepaid credit cards (where you need to maintain a fixed deposit in order to get a credit card) is a form of secured loan or not? If not then why so?

Also is prepaid credit card good for building credit history?

  • My country is India.
  • Here, credit score is known as CIBIL score.
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    @RonJohn: OP appears to be talking about a secured credit card and not a prepaid card. The accounts actually called prepaid cards (as well as the ones called gift cards, which are also prepaid cards and may or may not allow refills) won't help you build credit history (in the USA). You need an actual secured credit card for that. – Ben Voigt Sep 13 '19 at 17:50
  • Note that a secured credit card won't help your credit mix if you already have real credit cards, because it is still a revolving account not an installment account. Credit mix looks for both installment and revolving accounts. The fact that most installment loans are secured is tangential. – Ben Voigt Sep 13 '19 at 17:52
  • @BenVoigt I am talking about something like this.. The description looks like a regular credit card to me – noobs Sep 13 '19 at 17:55
  • @BenVoigt how did my eyes skip over "prepaid"? :( – RonJohn Sep 13 '19 at 18:06
  • @RonJohn Can you please offer some bounty on this question so that it gets some more attention? – noobs Sep 17 '19 at 18:06
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I believe I can answer this question, Prepaid cards, unlike secured credit cards, aren't reported to the FOUR major credit reporting agencies in India, so using one won't affect your credit score. That means you can't use it to help build your credit as you would with a secured credit card.

A secured credit card is an easiest and convenient way to get a credit card without having a CIBIL score which in return may help you to build a CIBIL Score. I had opened a Fixed Deposit with HDFC Bank to get a secured credit card. The FD was used as collateral.

Most HDFC credit cards can be obtained based on FD including premium cards like HDFC Regalia if you have FD of approx 4 Lakhs or so.

This should help.

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  • OP wants to know if a credit card obtained on the basis of a FD is reported to CIBIL as a credit card backed by a FD. – Canute S Sep 16 '20 at 19:27
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    Yes the credit card obtained on the basis of an FD is reported to CIBIL. – Ankur Dhariwal Oct 26 '20 at 7:56
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No, prepaid credit cards are technically an unsecured loan. But you are the one who is making the loan, not borrowing the money. You are lending your money to the card company, who repay it over time as you use the card. It’s unsecured because you have no priority claim on any of their assets if they default.

A secured loan for the purposes of your credit report is when you borrow money and put up an asset such as a car or house to back the loan, and let the lender repossess and sell it if you default on your payments.

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