Secured Credit Cards
Build/Repair Your Credit With A Secured Credit Care

Why Get A Secured Credit Card

A secured credit card is for people who have not yet established credit, for whatever reason, or those with a poor credit history. People falling in these categories usually have a very difficult time obtaining an unsecured credit card. In fact, they probably would not be able to get a credit card without security because lenders find it almost impossible to take a chance on anybody who either has no credit record or has a bad one. Getting a secured credit card is a very good way to rebuild your credit history after a bankruptcy or other credit problems.

You might consider applying for a secured credit card if you are unable to qualify for a regular credit card which would include:

• poor credit history
• delinquent student loan payments
• having declared bankruptcy
• disruption in your employment
• recently started a new job
• separation from your spouse who has a high debt ratio.

Secured credit cards and unsecured credit cards look the same, and they usually offer the same security and charging privileges. There is nothing about the card that identifies it as a secured card. It can be used just like any other credit card, and is accepted throughtout the world by merchants who accept credit cards.

How to Get A Secured Credit Card

You should open a savings account or a CD account in your name, first of all.  Next, make a deposit into the account which will serve as collateral for the card.  For example, if you deposit $400 into the bank account, then the credit limit on the card will be $400.  If you are ever in default with the card, the bank will have the right to take the money from the savings or CD account to pay the balance. 

The money you deposit will earn interest, but you will not be able to take it from the account at any time.  You can have access to the money if you cancel the card and have no balance on it.  The secured credit card issuer will determine the amount of the deposits.

You will be responsible for paying the credit card bill every month the same as you would if the card were unsecured.  Each payment you make on time will be a good mark on your credit report.  On the other hand, every time you are late, that, too, will show up. In addition, just like a regular credit card, you will pay fees and interest if the balance isn’t paid in full each month. 

As you build a good credit history with the issuer over a period of time, your limits on the secured card may be raised, or you may even be offered an unsecured card with a low credit limit.  At any rate, you are on your way to building a good credit history, which will allow you more credit flexibility.  

Comparison of Secured Credit Cards to Other Cards

Secured credit cards are quite similar to bank debit cards, except the money spent is not withdrawn immediately, and the card holder makes payments monthly. Secured credit cards can also be compared to what is known as "prepaid" credit cards because the money has to be paid into an account. With prepaid cards, the cards are "loaded" with money that will be available for use, and fees are prepaid at the time the deposit is made into the card. This is not true of secured credit cards.

Advantages  and Disadvantages To Having A Secured Credit Cards

Advantages - Secured credit cards can help you establish credit if you do not have a credit history. They are also a way to re-establish credit if you have bad credit or have declared bankruptcy. Like any credit card, these cards are good to have for emergencies.

 Disadvantages - You do have to make a security deposit equal to or more than your credit limit. Your deposit is frozen until your credit standing has been established, and you may not receive interest on your security deposit.

Other disadvantages include a higher APR rate because you are considered a high risk customer. This, in turn, causes monthly  payments to be higher than they ordinarily would be.

If you are considering getting a secured credit card, read all you can, and shop around to find out what options are best for you. 

 Best Selling Credit Repair Package - Tips and Advice From An ex-Credit Manager.

For more credit information, see:

Credit Repair - Best Ways to Better Credit
Credit Card Fraud Protection - Consequences Can Be Grave
Credit Card Debt Consolidation - Manage Your Indebtedness
Free Prepaid Credit Card - Start Establishing Credit
Secured Credit Info - Facts for Consumers