If you have poor credit or no credit history at all, secured credit cards are still one of the best ways to get some credit and start building your credit score. Chances are high you will get approved, and most reputable card issuers will even report your payments to all three of the major credit bureaus.
So, what’s the key difference between secured and unsecured credit cards?
In one word—collateral. A secured card is “secured” because you’re required to deposit a certain amount of cash with the bank issuing the card. In addition, your credit limit will be same or perhaps even less than the amount you deposit. So, unlike an unsecured credit card, which provides you with a credit limit in return for your promise to repay whatever you spend, secured credit cards will hold the cash you deposit as collateral for your future credit card bills.
For example, if you deposit $1,000 in cash with the credit issuer, then your credit limit will likely be $1,000. And since you have basically pre-paid for the maximum amount you may charge to the card, the creditor is guaranteed you will never miss a payment. As you spend wisely and pay your bills on time, most banks will reward your diligence by reporting your activity on a monthly basis to Experian, Equifax, and Transunion.
As always, it will take time and financial discipline to build or repair your credit history, but your diligence will certainly pay dividends in the future.
Posted By: Joshua Heckathorn | Category: Credit Cards | Comments (2)
| 
Subscribe |
Recent Posts
- Ask Creditnet: What No Pre-set Spending Limit Really Means
- Citi Diamond Preferred Review – 18 Months 0% Interest
- Ask Creditnet: Best Way to Get Cash When Traveling Overseas
- Best Credit Card Sign-Up Bonuses for Summer Travel
- Chase Sapphire Card Review: Flexible Rewards & No Annual Fee
Popular Posts
- Capital One Venture Card Now Matches 100,000 Miles
- Citi PremierPass Elite Makes Me Smile
- Piggybacking: What’s the Deal?
- Creditnet’s Back to School Prepaid Debit Card Giveaway
- How to Dispute a Credit Card Charge
Categories
- Ask Creditnet Questions
- Credit Card Reviews
- Credit Cards
- Credit Crisis
- Credit myths
- Credit News
- Credit Repair
- Credit Scores
- Investments
- Miscellaneous
- Mortgages
2 Responses
John
04|Mar|2009reallly good info thanks for sharing with us…
Quora
09|Jun|2011Are secured credit cards still a good way to add positive trade lines to your credit history?…
Using a secured credit card is still one of the best ways for those with bad credit to start rebuilding positive payment history again. There are good ones and not so good ones, so do your research online and choose a card with minimal fees that report…
Leave a reply