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A secured credit card is similar to a standard credit card, but with one big difference: To get a secured credit card, you have to first make a deposit with the card issuer equal to the amount of credit you'd like. So, for example, if you write the credit card company a check for $500, that $500, less any fees, becomes your credit limit. (Make sure you read the card agreement closely so you're aware of any fees that may apply.) Back to top.
Many people with bad credit don't qualify for traditional credit cards, so a secured credit card is a great way to enjoy the convenience of a credit card when you need it, while simultaneously building credit. Eventually, users of secured cards can graduate to traditional credit cards, so long as they've used the card responsibly (no missed or late payments). Back to top.
Some people who are interested in secured credit cards are also interested in prepaid debit cards. Prepaid cards are also a good, convenient option for people looking to make purchases with plastic (they function like a credit card when you are shopping, except that you cannot spend any more than has been loaded on the card). However, there is an important difference between secured cards and prepaid debit cards. Prepaid debit cards do not help build credit. Since the bank isn't extending you a line of credit for a prepaid debit card, your responsible use of a prepaid debit card is not reported to the three major credit reporting bureaus. That's not to say you must choose one or the other; prepaid cards have benefits as well, and can be part of a strategy to rebuild your credit, which we cover below. Back to top.
Maybe your credit got trashed because of a medical emergency or a job loss. Or maybe there was some other reason you couldn't pay your bills. In the end, when it comes to rebuilding credit, the reason you ran into trouble doesn't matter. A secured card can help you get back on track. Secured cards are different from prepaid debit cards because they report your payment history to one or more of the credit reporting agencies: TransUnion, Experian and Equifax.
As you rebuild credit, you'll want to be careful to avoid using more than 20% of your credit limit, because your credit score reflects how much of your available credit you are using. (So, because the amount you deposit for a secured card will be your credit limit, if you deposit $1,000, you would want to keep your balance to $200 or less. If you want access to more than that, you could consider securing your card with $500, and putting $500 on a prepaid debit card. Then you would have access to a little more than $600 -- $100 from the secured card and $500 from the prepaid debit card -- while still rebuilding your credit. You should look for cards with low or no fees.)
Carefully employing a secured credit card, keeping balances low and paying on time and as agreed will allow you to establish or rebuild your all-important credit score and begin to restore your credit. Back to top.
*For complete information, see the terms and conditions on the credit card issuer’s website. Once you click apply for this card, you will be directed to the issuer’s website where you may review the terms and conditions of the card before applying. While Credit.com always strives to present the most accurate information, we show a summary to help you choose a product, not the full legal terms - and before applying you should understand the full terms of products as stated by the issuer itself.
** FICO scores and credit scores are used to represent the creditworthiness of a person and may be one indicator to the credit type you are eligible for. However, credit score alone does not guarantee or imply approval for any credit card offer.
†Advertiser Disclosure: The credit card offers that appear on the website are from credit card companies which Credit.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). The site does not include all credit card companies or all available credit card offers.