What Are Secured Credit Cards?

With so many different credit card companies and a million different cards available it can be overwhelming trying to find one that’s right for you. And that’s with good credit history; what about those who have poor credit history? If you have poor credit or none at all secured credit cards might be the best for you. But what are secured credit cards and what are the advantages to having one?

Secured credit cards are becoming quite popular among individuals today and might be the best option for you. A secured credit card works almost exactly like a checking or savings account would work. The credit limit is made secure with a specific amount of money that you deposit onto the card. In order to get one of these cards you must first have the money to put on it; this makes it less of a risk to the bank. Although that may be advantage it can really help you rebuild your credit standing. A secured credit card works much like a regular credit card in that you will have to pay off the balance at the end of each month and if you don’t you will have fees that will incur.

So why would anyone want a secured credit card if you have to have the money to put down ahead of time? Well there are many advantages to having a secured credit card; not spending more money than you actually have is one of those. The two main groups of people who want to get secured credit cards are those that have no credit, and those that are trying to rebuild good credit. With either group, it’s a good idea to have a set limit so you don’t make the same mistakes as you did last time, or start your credit adventure off on the wrong foot. Let’s face it, almost anyone can qualify for a credit card so placing a spending limit on yourself isn’t such a bad idea. This can also work towards your advantage as that credit card bureaus are usually not able to distinguish between a traditional credit card and a secured credit card. The fact that you have a set limit on your card can help ensure that your credit score increases and you don’t find yourself in debt up to your eyes again.

Another advantage to having a secured credit card is that you are not charge an annual percentage rate on the money that you deposit onto the card. With most traditional credit cards you will be charged high interest rates, late fees, and finance charges over a period of time; you usually end up paying twice what the balance on your card is. With a secured credit card there is no APR and you can actually have your paycheck deposited right onto the card. You know exactly how much is on the card and how much you’re paying for an item.

If you’re thinking that getting a secured credit card might be the route for you to take there are some warnings you should be aware of. There are many different companies that prey on innocent people who are looking for an easy way to build credit. Don’t be scammed when you are searching for a secured credit card that will work for you. Some things to look for are in avoiding a scam are:
• Companies that offer “easy” credit guaranteed. No one can guarantee that you will ever qualify for a credit card. Your credit report will always need to be examined before offering saying anything is guaranteed.
• Calling 900 numbers for a credit card. You will have to pay for a call made with a 900 number and probably never receive the card.
• Offers made by credit repair companies or credit clinics. They will most often claim to “clean up” your credit history for a small fee. You can do this on your own by creating good credit habits and talking with the credit bureau.

So what are secured credit cards? They are cards that will allow you to set a limit for yourself and control the amount of debt you can get yourself into. Of course there is much more to them than that; make sure you do all your homework before you decide to get one so you can make an educated decision.