Secured Credit Cards – The Gritty Details

When you’re scouring the market for a new credit card with a less-than-perfect credit report, you’ll likely encounter a myriad of “Thank you for your application, unfortunately…” statements. While you may not qualify for a traditional credit card, there is an alternative. Secured credit cards were designed to assist those with bad or no credit obtain a credit limit without the fear of adding excessive debt. When these cards are used correctly, you’ll experience a boost in your score and financial future; however, when used improperly, your credit report and financial standing will significantly suffer. Continue reading to uncover the gritty details of secured credit cards. If your credit score is suffering, visit for information on how to increase it.

Secured Credit Cards Explained

During a traditional credit card application process, you’re given a credit limit based upon credit scores and report information. For some, this results in a decent limit with low interest rates; however, for a growing number of consumers, even the option of an unsecured credit card is taken away. This is where secured credit cards come into play.

With a secured credit card, your credit score is typically left out of the question. Instead, the credit limit is set not by your current credit report, but rather based upon an initial deposit. Unlike prepaid credit cards, where you must replenish the deposit amount to keep using the card, secured credit cards use this deposit as a means of establishing a line of credit. Considered collateral in the banking world, if you were to default on your card the bank still receives its owed money – and you still receive a negative credit report mark.

As you make your monthly payments, and they’re on-time, the credit card company reports this activity to the major credit agencies. Therefore, over a period of time, your credit score is improved. This is an essential process for those with no or bad credit.

What to Watch Out For

While the notion of a secured credit card seems pleasant enough, there are some serious pitfalls to this credit option. Firstly, it’s not unheard of for major banking institutions to deny a secured credit card application from those who have a history of negative credit reports. This seems to be a trend in the 2014 financial industry as more and more credit companies are moving to unsecured cards with lower limits and higher interest rates for those with less-than-perfect credit. Therefore, avoid this situation by choosing a card that doesn’t check your credit for approval, but reports account activity to credit bureaus. Also, avoid secured cards with a monthly “insurance policy.” This is considered black-hat banking techniques as the bank is literally stealing money out of your wallet. The initial security deposit should be the only out-of-pocket fee you encounter. If not, continue with your search for the perfect credit card such as this one