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What Is A Secured Credit Card


When an individual has credit problems, using a secured credit card can provide him with purchasing power and a tool to help rebuild his credit. These cards are offered by many of the biggest companies in the industry. What exactly is a secured card and what type of benefits does it provide to a consumer?

What is a Secured Card?

A secured card is one that has some kind of collateral attached to it. By using collateral, the card company does not have to worry about filing a lawsuit or doing anything else when the borrower doesn't pay back the debt on his card. The company can simply take possession of the collateral and the debt will be settled.

With this type of card, the card holder is required to put up some kind of deposit to act as the collateral. For example, the card issuer may request that the account holder put up $500 to act as collateral. At that point, he will be given a $500 credit limit. The account holder can then use the card to make up to $500 of purchases. In some cases, the amount of the credit limit will be more than the deposit. Sometimes, the card issuer will double the deposit to create the credit limit.

Easy Approval

One reason that many consumers use this type of card is because it is easy to get approved for. With a secured card, almost anyone should be able to get approved because the deposit reduces or eliminates the risk for the card issuer. If an individual has a bad credit history, he may not be able to get approved for a traditional card. In this situation, the account holder can still get approved for a secured card and then use it anywhere that a regular card is accepted. Sometimes, consumers need access to a card so that they can make a purchase. For example, when reserving a hotel, a consumer needs some kind of card to get the job done. With a secured card, the consumer can reserve the room even if he doesn't have enough credit to get a regular card.

Rebuilding Credit

Another reason that many consumers get a secured card is because it helps rebuild their credit. When a cardholder uses a secured card and then paid his bill, this information is reported to the credit bureaus. Every time a payment is made on time, it helps to build up the individual's credit profile. Payment history is one of the biggest factors in determining a credit score. By making payments to the card issuer, the cardholder can start to build his credit up to a more respectable level. This is a favorite strategy of people that go through bankruptcy or have a foreclosure and hurt their credit scores as a result.


Using a secured card can be an easy way to make purchases and to rebuild credit. However, payments have to be made by the due date of the account or it could do more damage to the cardholder's credit profile. With a secured card, the user still has to treat it like a regular card in order to avoid any more damage to his credit. When used correctly, it can be a powerful tool to help recover after serious credit damage.

About Author Abby Crowhurst :

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Article Added on Monday, April 29, 2013
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