What Is a Secured Credit Card?

Secured credit cards are not really credit cards… Credit, by its nature, means the company issuing the card is giving you the credit of believing you’ll pay off your bills on time. A regular credit card is really a short term loan to buy almost whatever you want.

If you pay off your bills within a single billing cycle, no interest is paid, though annual card fees may apply. Credit cards will allow you to immediately buy things that might require a number of paychecks to afford if you chose to save up for them.

That’s hard to do if that ‘thing’ is fixing your car’s transmissions or taking someone special on a weekend getaway. Credit cards are also a matter of massive convenience and prestige.

Being able to whip out the ‘plastic’ and make the transaction happen is often required to look like you’ve got your act together without carrying mass cash. This is why so many people use them every day!

However, if you’ve had some bad luck or made some purchases that were really too big to handle, you may no longer have the credit score to get a regular credit card. This is where a secured credit card comes in.

You can still get all the bonuses of a credit card without having to deal with the problems. On a secured credit card, you put up money in advance. This amount becomes your effective spending limit. That keeps you from being able to get in the same kind of trouble using a secured credit card that you can using ordinary credit.

This is also a great way to rebuild your credit if it’s less than fantastic. Just make sure that the issuer of your card is providing reports to the major credit bureaus. While a secured credit card won’t let you spend more than the cash you have on it, it still gives you all the convenience and other benefits of buying with plastic, plus allowing you to fix up your credit.

If you are considering a secured card to improve your credit, make sure they report your on-time payments to the credit bureaus - if not, it won’t help your credit. If you’re just looking for convenience and an insurance policy against overspending, any secured card will work, just make sure you pay as little as possible in fees!

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