Secured Credit Cards

If you have bad credit or no credit at all, it can be very hard to obtain an unsecured credit card. You may qualify for a secured credit card. “Secured” means the card issuer requires you to make a deposit into a special savings account to collateralize the credit line. Therefore, secured credit card issuers will approve the majority of applicants. A secured credit card can offer many of the same benefits as an unsecured credit card.

Candidates for Secured Credit Cards

Secured Credit Cards are ideal for consumers who are establishing credit. If you have never had any type of credit (credit cards, car loans, etc..) it is very difficult to qualify for an unsecured line of credit.

Students, divorcees, widows and immigrants are often denied for credit for “no credit history” or “insufficient credit history”.

Consumers with previous credit problems are often denied credit.

Many secured bank credit card issuers will consider your application, even if your credit history shows liens, charge-offs, repossessions, or a discharged bankruptcy (as long as the problems are under control and in the past).

Secured credit cards offer the opportunity to build a meaningful credit history that future lenders can rely upon.

Establishing a good payment history with a secured credit card, over a period of time, could open up many other credit options for you.

Demonstrating responsible use and the ability to make payments on time can give you another chance in the credit world.

Finding The Best Secured Credit Card For You

First, decide what features are most important to you:

application fees

annual fees

finance charges

accrued interest on the deposit

available line of credit

minimum savings deposit

Once you have been accepted for the credit card, you are required to make a deposit into a special savings account. The minimum deposit required can range from $100 - $500.

Secured credit cards provide the same charging privileges as an unsecured credit card.

There are no visible differences between a secured and unsecured credit card (only you and the credit card issuer will know)

Interest rates and annual fees may be higher on a secured card.

Re-Establishing Credit With a Secured Credit Card

It is a good idea to carry a balance on your secured credit card for at least several months - Carrying a balance and making regular consistent monthly payments will show your ability to use credit properly

Do not go over your credit limit

Do not make late payments

Do not pay with a bad check

Try to pay a little more than the minimum payment each month

Savings Deposit

Some issuers will accept applicants with a deposit as low as $100, but most require a $300-$500 deposit. This should help you contain your debt to a healthy level.

Consumers with unsecured debt (not including automobile or home loans) exceeding 20% of their annual gross income are considered ‘risky’ by most lenders.

Do not confuse secured credit cards with the newer debit or check cards. Debit cards directly access or debit a designated checking or savings account.

The funds that you deposit with a secured credit card bank are not touched unless you default on the credit card account.

In most cases, your deposit will accrue interest.

Most secured card issuers will review your payment record at the end of the first full year.

Some issuers will return your savings deposit and turn your secured account into a regular unsecured account.

Some issuers will raise your credit limit.

With some banks you may have to request the increase of your limit.

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American Debt Solutions, Inc., a Non-Profit Credit Counseling Agency is a 501(c)(3) nonprofit organization providing consumers with free credit counseling and education as well as economical debt management services.