Secured credit cards are special type of credit cards which are issued against
a collateral. Generally a checking account or some other collateral comes into
picture while issuing of a secured credit card. The credit limit of a secured
credit card is equal to the value or amount available in the collateral. It
is particularly rare to get a credit greater than this amount with a secured
Secured credit cards option are exercised generally by those with bad credit
history and poor credit score to get themselves back on track. Credit card issuing
companies, ask for collateral because they find providing credit cards to such
people too risky. A good use of secured credit card can give the credit card
issuer enough confidence to issue an unsecured credit card in your name.
A good thing to have with secured credit cards is that they should report your
spending habits to the three major credit reporting agencies. Strange but true,
not all secured credit card holders do that. Unless this feature is present
in a secured credit card, it will be of little use for those trying to use it
for rebuilding their credit history.
Though secured credit cards are linked with a collateral, they still have some
fees and terms associated with them. Before going for a secured credit card,
a person must check the various APR's associated with the credit card. If the
secured credit card charges an annual fee, the applicant should try to get one
with the lowest amount of interest rates and annual fees. The billing period
and grace period allowed for repayments should also be considered. Already suffering
with a bad credit situation, the last thing to do with a secured credit card
is to take a cash advance with it, simply because the cash advance attracts
high interest rates and a cash advance fees.
Care should be taken that the secured credit card is actually used in a way
that rebuilds credit history. Sticking to repayment schedule like a religion,
and not over indulging with the credit card will help a lot in getting the most
out of your secured credit card.