Skip to main content

What is a Secured Credit Card?

A secured credit card is a type of credit card that requires a security deposit before it can be used. The deposit acts as collateral for the credit line and is used to cover any unpaid balances or fees if you stop making payments. 

Secured credit cards are often designed to help people who have a bad credit history or no credit history. They are similar to a prepaid card but they require you to make monthly payments

They report to credit bureau, which can help to build your credit score if you make the payments on time or hurt your credit score if you miss or make your payments late.

Even though you make the deposit on a Secured Credit Card you will still have to make the payment on time when the statement comes.  This is how you start building Credit.
  
On Time Payments are Critical
Often if you make your payments on time for six months or a year the secured credit card company will refund you the deposit on your card and give you a credit line.  This will only happen if you make all your payments on this and any other credit you have on time.

My Favorite Secured Credit Card
My favorite Secured Credit Card is the Discover Card.  This card has no annual fee and will even give you one percent cash back on your purchases with your Discover Secure Credit Card.  

If you make payments on time and do not make other credit mistakes they will usually convert your Secure Card to a regular Credit card within a year.  At this point they will refund your Secure Card Deposit and give you a regular Credit Card.

Secured Credit Cards are one of your first steps to building a good credit history.  Check out my Special Note on Secured Credit Cards.  

Also check our getting a Credit Builder Loan and where to get your Credit Score for Free.
Labels:

Comments

Post a Comment

Popular posts from this blog

My Introduction to Airline Miles

 I was first introduced to airline miles by a friend who had just gotten a United Airline Chase Credit Card .   I signed up and started getting airline miles for all of my business purchases.  Just for signing up I received 50,000 miles.  I believe I had to spend $3,000 in the first three months to get the 50,000 points.  This was a great bonus, two free flights anywhere in the US for spending $3,000 which I would have spent anyway.   The annual fee for this card is $95 which is waived for the first year. It took 25,000 airline miles to get one round trip ticket anywhere in the US.  Short flights would only cost 20,000 airline miles. I used just this Chase United card for a couple of years and earned a couple hundred thousand Airline Miles on the purchases my business made.   More Chase Points Cards I applied for and got more Chase credit cards for points.  I got the first Chase Freedom card with no annual fee.  This ca...
Post a Comment
Read more

Why I don't Use My Debit Card

I avoid using my debit card because I'm frugal. Instead, I rely on multiple credit cards that offer a 1% to 5% rebate on purchases. In contrast, using a debit card doesn't provide any rebate or financial benefit. Free Float Another reason I prefer credit cards is the free float they offer. When I use a credit card, the money for my purchase doesn't leave my checking account until 10 to 40 days later. With a debit card, the cash is deducted from my checking account within a day or two. Merchants typically pay a fee of 1% to 4% for credit card transactions, and most have already factored this cost into their prices. Some merchants, however, offer different pricing for cash versus credit card payments. Gas stations are a common example of this practice. Being frugal, I always opt to pay with cash if it saves me money compared to using a card. Cash Back (Credit Card Points) During a recent road trip through the western United States, I encountered several gas stations offering ...
Post a Comment
Read more

How Home Loans Impact Your Credit Report

Home loans have a different impact on your credit score than credit cards. Since most home loans last for 30 years after a few years they are an excellent credit reference. That is if you make your payments on time. The monthly grind of making the Home Mortgage Payment isn't much different after a few years than paying rent.  The rent increases over the years while your Mortgage payment will stay the same except for tax and insurance increases.  For many households the increase in house prices creates the largest family asset. The Home Loan is often the longest loan to show up on your credit report.  It also shows lenders you can make payments over an extended period of time.   The size of your Home Mortgage payment when compared to your claimed income when you Apply for a loan may also have a significant impact.  
Post a Comment
Read more