About Secured Credit Cards
Why choose a secured credit card?
A secured card is an option to consider when it comes to building or rebuilding credit. If you fit that criteria and have money that you can deposit into an account for the secured line of credit, once your application is reviewed and approved, the required deposit has been made, and the funds are verified, you may be approved for the card. Typically the amount requested for security deposit starts at about $200, but this amount varies by the issuer.
What is a secured credit card?
A secured credit card is a type of credit card where your credit limit is typically based on the amount of money that you deposit into an account. If you deposit $1,000 you will either have $1,000 as an available line of credit or a percentage of that $1,000 will be available as a line of credit, again this depends on the issuer. It is important to keep in mind that this limit is not set in stone with some card issuers and that the card issuer may raise your credit limit if you manage your accounts responsibly, such as paying your balances on-time every month. A secured card is different then a prepaid card because a secured card is a credit card, a line of credit will be extended to you generally based on the amount of your deposit into an account which is held by the card issuer, the deposit is used for collateral and you must pay the credit card balance due each month. While with a prepaid card each time you make a purchase that purchase amount is immediately deducted from the balance on the prepaid card and when the balance is gone you will need to deposit more money in order to continue to use the prepaid card.
What kind of card can I get?
If you currently have bad, poor or fair credit then this type of card may be an option to start building or rebuilding your credit history. Although a secured card generally won’t have the best benefits and does require a deposit, it’s still an option to consider. Make sure to read about the benefits of each card and what they offer and compare any fees that might be charged.
What are the pros and cons?
The benefit of a secured card is that it can be used as a tool to help you build or rebuild your credit, even if you have a low credit score right now, you can use the card as a stepping stone to establish your creditworthiness by making on-time payments and managing your account responsibly. The downside is there is a minimum deposit that has to be made in order to get started. Other downsides may include having an annual fee and a high interest rate.