Secured Credit Card

First of all, let's discover what a secured credit card actually is! A secured credit card is a credit card that can only be used after you have deposited money into a savings account connected to the secured credit card, and you need to maintain this amount as security for the line of credit that you have on your secured credit card.

The amount of this deposit varies greatly depending on the credit card company, and can vary from a few hundred to a few thousand dollars. Typically the line of credit you are given for a secured credit card is a percentage of the amount you have deposited, anywhere from 50 - 100 percent. It is usual for banks to pay you interest on this deposit, but read the fine print first so you know for sure!

Look out for other fees involved in possessing a secured credit card. Some companies charge application fees as well as processing fees, and check whether this is refunded if, for some reason your application is denied. Then there are often fees charged each time you make a deposit to your account.

A secured credit card is not for everyone. It does tie up money in your bank account, whereas for a regular credit card, you pay for the goods you have bought afterwards, not ahead of time, as with the secured credit card.

For an unsecured credit card, you do not have to have funds deposited into an account, although typically you will not be approved for an unsecured card if your credit history is poor.

Perhaps a better way to go for some people is to use a prepaid credit card, rather than a secured credit card. This is where you pay in advance, and can then use the credit card up to the amount you have loaded onto the card. But again, be aware of extra charges. Some companies charge you for each deposit, so you need to minimize the number of deposits, unless you like paying bank fees! Note that the prepaid card does not tie up funds like the secured credit card does.

The prepaid credit cards are a great way to go for people who have a poor credit history. You pay in advance, and then use these prepaid credit cards just as you would any other credit card, up to your credit limit. When your balance gets low, you preload the card before using it again. If there is no money in your credit card account, then you cannot use your prepaid credit card. This is an advantage for compulsive spenders, and does help you to budget better!

When applying for regular credit cards, you do not need to load your card before using it, or have secured funds available, but you do have to have a good credit history which suggests you will be able to pay at least the minimum monthly payments without a problem.

So prepaid credit cards, secured credit cards, or regular credit cards, the choice is obviously yours, although it does depend on your financial history, and the current state of your finances. Choose wisely!

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