Secured Credit Cards

Nov 11, 2011

When you apply for a credit card it is important to note that there are two different types – secured and unsecured. An unsecured credit card requires a certain credit score and credit history. Most of the offers that come in the mail are for unsecured credit cards. A line of credit is issued, up to a certain amount and the recipient can spend it as needed.

If you have no credit history at all or you need to improve your credit scores, a secured credit card can help. Instead of just getting a regular line of credit, you provide the bank with a deposit. For whatever you pay, you are given access to between 50 and 100% of the deposit. Many people look at a secured credit card much like they would a pre-paid debit card.

One of the benefits of a secured credit card is the ability to build up your credit score. When choosing a bank or company to work with, be sure that they report to the credit bureaus. Without the reporting, there is no way to build or improve upon your credit score. It will take time for the reports to be issued and you want to show a real consistency for an extended amount of time.

Unlike a pre-paid debit card, you can`t depend on your deposit to cover the charges to your card. You are still required to make payments and pay off the amount that you spent. The key is to only make purchases that you know you will be able to pay off. As payments are consistently made on time your score improves. Eventually you may be able to turn the secured credit card into an unsecured credit card account.

Before signing up with any company for a secured credit card you need to make sure that you read all of the information provided to you carefully. You already know that you want a company that will report your good credit choices to the credit bureaus, but there is more. You also want to shop around for a company that charges reasonable rates.

You can expect that it will cost you more to set up a secured credit card than it would an unsecured card. At the very least the interest rate is typically higher. There will be an annual fee and if you are late or miss a payment entirely, the fees will add up quickly. In some cases, depending on how much of a deposit you gave, it can wipe out the deposit completely. If possible, send your payments in on time to avoid overwhelming fees.

Over time your credit score will improve. If the company or bank you are working with offers you an unsecured credit card you can transition over your account. If the company does not offer this type of transition, you should be able to find another offer from a different bank or company.

If you are interested in obtaining a secured credit card, take the time to shop around for the right company to work with. As you work to repair your credit and pay off the existing debt, use a loans calculator to see just how much your debt is costing you and what type of changes you can make. For further help with loans calculations visit

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