How Can Secured Credit Cards Help Me?

If you are having trouble with your credit score because you have a poor history of paying bills on time or in full when due, you will probably not be able to receive a personal loan. If this is the case, you may be wondering how to repair or rebuild your credit score. Secured credit cards are probably your best bet.

These credit cards work by requiring the user to secure their credit by providing collateral in a savings account. Unlike pre-paid credit cards, you are able to build a credit history with a secured credit card because you are still required to make payments on time. This information is held by the credit bureau. If you miss your payment, it is recovered by the credit card company via the collateral you put up in your application process.

Using secured credit cards is the same as any other type of credit card. The merchant you are purchasing from will not know that you are using a secured credit card. Sometimes your credit card company will allow you to go a bit over your credit limit but this is rare. The other difference from a pre-paid credit card is that you will be charged interest on your purchase from the moment it is made. Unlike typical, unsecured credit cards, you will not have thirty day grace period before interest is charged.

Secured credit cards often come with very high interest rates. But people who have poor credit histories who wish to have a credit card often have no choice but to apply for and use secured credit cards.

These type of credit cards are specially targeted at people with bad credit. You may have had a loss in your credit score because of a foreclosure on your home or a bankruptcy in your business or you simply could not pay your bills on time each month. Regardless of the reason, if you wish to repair your credit using secured credit cards may be your only option.

Most secured credit cards to not have any user perks like the ability to accrue travel miles or anything like that. They are simply what they say they are: credit cards with a set spending limit tied to a savings account that is secured by your pre-deposited collateral. That being said, some secured credit cards do offer some limited perks so shop for one carefully. You will want to make sure you can get the lowest interest rate possible.

Some of these credit cards are offered through credit unions and these typically have the lowest interest rates available.

There are hundreds of sites on the Internet where information about these credit rebuilding tools is available. Read through the information carefully, though, to make sure you are getting the best deal and that the card will help you rebuild your credit history. Compare interest rates between cards and look carefully at the collateral requirements. There is no point in having to put up more collateral than you can afford and then finding yourself in another bad cash flow situation.