Are Secured Credit Cards still the best way to establish credit?
Secured Credit Cards are designed to assist people who have never had credit or those who have bad credit, in order to enable them to establish a good credit rating. Typically, secured credit cards are issued when the holder is able to offer a type of “security” deposit to the lender by depositing a pre-arranged amount of money into a savings account, money market or certificate of deposit. This is how it works: Usually, for a small fee, the lender will allow the card holder to utilize the credit card within the specified parameters. Unlike using the cash for any purchases, the secured credit cards creates a credit history for the holder, thus contributing to their overall credit rating. With a secured credit card, it is imperative that you make full payments each and every month; otherwise interest is charged on the outstanding balance. If you default, the lender will use the amount in the security account to pay off the debt and this can result in more damage to your credit rating.
