Banks are cautious these days, and if you have limited or poor credit history, they may require a deposit to act as collateral on your credit card account. Think of it like a security deposit you'd put down on apartment. The bank protects itself, while still letting you build up your credit history. It's a win-win situation.
The advantage of secured credit cards is that they may be able to help build, rebuild, or reestablish your credit history if you make on-time minimum payments with all your creditors and maintain your account balances below the credit limits. Let the Credit-Land.com experts steer you toward the card with the lowest fees and best terms for your needs.
Secured credit cards require a small deposit of collateral and are subject to interest rates. Your security deposit may be refunded eventually if you pay off your entire balance each month. This also helps avoid high interest and improves your credit score.
The Skinny on Secured Credit Cards
If you can't get approved for an unsecured credit card, you can still apply for a secured credit card. Secured cards require a deposit and give you a better chance of being approved.
Unlike prepaid cards, secured cards do report payments to the three major credit bureaus (Equifax, Experian, and TransUnion), so using one can help rebuild a damaged credit history by making on-time payments with all your creditors and keeping balances below the credit limits. If you make payments successfully for a period of time, some issuers will convert your secured credit card account to a conventional, unsecured one.
Secured cards are recommended for people with past financial challenges and bad credit history. Banks are wary to approve people with bad credit and might deny their applications, even with a security deposit.