Things to watch out if you have a bad credit and want a secured credit card

Cynthia Stewart
Jun 9, 2007
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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 credit card.

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.