What is a Secured Credit Card?
Secured credit cards are credit instruments that are issued by financial institutions such as banks. Like all credit cards, the secured card is established with specific terms relating to the rate of interest applied to the balance, minimum monthly payments, and a pre-determined credit limit. What is different about a secured credit card account is the card is backed by funds that the card holder deposits into a savings account that is managed by the card issuer. The process for securing a card of this type is fairly straightforward. As with all types of credit cards, it is necessary to apply for credit privileges by filling out an application form. Along with completing the form properly and meeting the basic standards required by the issuer, the applicant also agrees to deposit a minimum amount of funds into a savings account controlled by the issuing entity. The balance in the savings account determines the credit line allowed for the card, with the credit limit being anywhere betwe
A secured credit card is like a secured loan; the consumer deposits money into a savings account or certificate of deposit (CD) as collateral for a line of credit. The card is the same in appearance as an unsecured card and offers the same convenience and charging privileges as a traditional unsecured credit card. Secured credit cards are ideal for applicants who intend to build or re-establish their credit history. However, a secured card is distinguished from an unsecured card on your credit report and does not necessarily guarantee future approval for an unsecured credit card. For applicants intending to built or re-establish credit, it is suggested that they carry a balance for several months and make all payments on time. This creates a positive credit history, which is beneficial to the cardholder when approaching future lenders. While secured credit cards are a viable option for almost everyone, there are some limitations. Most issuers do not accept applicants that have been con
The big difference between a secured credit card and an unsecured credit card is that a savings deposit serves as collateral for a secured credit card. To get a secured card, you deposit money into a savings account. Depending upon the policy of the issuer, you may not be able to withdraw this money until the account is closed.
Secured credit cards require collateral for approval. With secured credit cards, a security deposit is needed to secure the credit card. The amount of the security deposit usually equals the credit limit for that particular credit card. Generally, secured credit cards are for people with no credit or poor credit who are trying to build or rebuild credit history.
A secured card is a credit card established by depositing money into an account. The account serves as security for the card; if the bill isn’t paid, the money in the account may be used to cover that debt. For example, if you put $500 in the account you can charge up to $500. You may also be able to increase the deposit to add more credit, or sometimes a bank will reward you for good payments and add to your credit line without requesting additional deposits. The amount you have to deposit will vary by the card. The typical minimum is $300 to $500, but you can find issuers that require $250 or less. Your credit limit will either be the amount of your deposit or some percentage above that amount.Your deposit options include a savings account, money market or certificate of deposit. Generally the interest rate you’ll earn on your deposit is what you’d get by opening a savings account at your own bank, but not always.A valuable steppingstone, not a bargain The interest rates and fees on
