Secured Credit Card

A secured credit card may be an effective tool when establishing or re-establishing credit. It is a type of credit card that is opened with a deposit into a savings account. The minimum amount of the deposit varies from card to card, but may start as low as $200 (the deposit is commonly refundable with secured credit cards). Unlike an unsecured credit card, your credit limit may be determined by the amount you deposit into the savings account. Keep in mind that a secured credit card is not a debit card and should be treated as a credit card. Just as with a standard unsecured credit card it is important to pay the amount due each month. Missed payments may cause late fee’s, increased interest rates and a possible negative impact toward your credit score.

Do Your Research!

Some secured credit cards have outrageous annual fees which you may want to avoid. Of course a card without an annual fee is desirable, but typically there will be a small one time fee in the range of $20 – $50. Be sure to watch out for hidden fees. Such as, fees associated with missing or not making a full payment, setup and registration. There may also be fees for increasing or decreasing your credit limit, but this can be avoided if you plan ahead and get the credit limit you need when you sign up. Also, watch out for deceptive ads that advertise such credit cards*.

Even if you have really bad credit there may be attainable secured credit cards that have relatively low APR’s. The higher APR is often based on the cards incentive program. You may be offered no annual fee, no foreign transaction fee, cash back and minimum ATM fees. At times, some cards, will give you a higher credit limit then your initial deposit (exp. deposit $99 – credit limit $200) depending on lending requirements. By doing your research you may be able to find the most competitive rates and fees. CNN MONEY offers information on the “7 best cards for bad credit”. Find the best one that fits your needs and after time you may see you score optimized!

*The Federal Trade Commission (Protecting America’s Consumers) warns us of deceptive ads or scams.

The Federal Trade Commission (FTC) has taken action against companies that deceptively advertise major credit cards through television, newspapers, and postcards. The ads may offer unsecured credit cards, secured credit cards, or not specify a card type. The ads usually lead you to believe you can get a card simply by calling the number listed. Sometimes the number is not toll-free. A ‘900’ number service, for which you are billed just for making the call, may instruct you to give your name and address to receive a credit application, or give you a list of banks offering secured cards. It also may tell you to call another ‘900’ number — at an additional charge — for more information.

Deceptive Ads Often Leave Out Important Information:

  • The cost of the ‘900’ call — which can range from $2 to $50 or more
  • The required security deposit, application, and processing fees
  • Eligibility requirements like income or age
  • An annual fee or the fact that the secured card has a higher than average interest rate on any
  • balance