Secured Credit Cards: What You Need to Know

Credit Cards
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 Min read
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August 5, 2021

If you’re trying to rebuild your credit after having some credit problems or if you haven’t yet established a credit history, a secured credit card is a good place to start. It’s usually easier to be approved for a secured credit card than an unsecured credit card. If you’re interested in learning about secured credit cards, what you need to know is explained here.

What is a Secured Credit Card?

A secured credit card is a credit card that is secured by funds you put down as a security deposit. The amount of your credit limit is usually equal to the amount of money you have deposited, so if you’ve deposited $500, in most cases your card has a $500 limit. Some card issuers may give you a credit limit that’s slightly higher than your deposit.

This type of card is usually issued through a major payment network such as Visa or Mastercard. It works like any other card and should be accepted anywhere credit cards are accepted, so you’ll be able to present the card as payment and then will be billed monthly until it’s paid back.

How Do Secured Credit Cards Work?

The bank or credit union holds onto your deposit while your credit card account is open. After you’ve established a history of paying payments on time for a certain number of months, the creditor may be willing to change the account to an unsecured account. If you don’t make your payments as agreed, your creditor can take your deposit to pay off what you owe.

Secured credit cards report payment history to the credit bureaus. As you work to establish or reestablish your credit, be sure you always make your payments on time. Setting your account up for automatic draft can help to protect you from forgetting to make a payment. If possible, borrow no more than 30 percent of your available credit.

Disadvantages of Secured Credit Cards

For some people, having to come up with a few hundred dollars to put down as a security deposit can be difficult. If this applies to you, try to set aside $50 a month until you’re able to save $250 to $300 for this purpose. When you apply for a secured credit card, pay attention to the fine print. There may be an annual fee, application fee, or a processing fee, and the interest rate you pay on the funds you use may be high. Try to get a card from a creditor with a good reputation. Online reviews can give you an idea if others have had difficulty with the credit card company you’re considering.

Be Proactive About Taking Care of your Credit

A secured credit card is a good first step toward taking care of your credit. It’s important to make sure your creditors provide accurate information to the credit bureaus. Misinformation can drive down your credit score. If you find errors on your credit report, Dovly is an automated credit repair engine that can help you get them corrected. Get in touch with Dovly today.


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