May 18, 2013
What is a secured credit card? Why would you own one?
What is a secured credit card? Why would you own one?
I secured credit card uses deposited money as collateral but other wise works like any other credit card. I can be used to rebuild damaged credit. Attention needs to be paid to the fees involved as they can vary greatly. It pays to research it.
You are correct, Larry. Let’s recap. A secured credit card is provided to you based on some type of collateral you provide to the issuer. This is done in most cases by placing $200 or more into a savings account at your local bank or credit union and then they provide you a secured credit card with that credit limit as your max. You cannot touch your money as long as you have the card, but you will earn interest on the account just as if it was any other savings account. After 6 -12 months you can ask the issuer to drop the secured part and presto, you will have credit and availability to your money. As always, I encourage you to pay your credit card off in full every single month. If you cannot do that, you are not ready for a credit card.
A secured credit card can be used to rebuild damaged credit like Larry stated. It can also be used to build credit for that person who has little to none and wants to start building their credit score through the proper use of credit. As the months go on you can ask for the credit limit to be raised, which in turn will improve your credit score based on credit used and available credit.
Generally speaking, the local credit union would be the best place to get a secured credit card. Most will charge you no fees while the local bank is notorious for tacking on fees here and there. Research carefully as Larry stated, BEFORE getting a secured credit card. The wise person always understands what they are doing BEFORE they do it.