A secured credit card is not for everyone but if you are in process of building or rebuilding credit history, it may just be the tool you need.  In this article, we will answer the most common questions people have about secured credit cards, also known as credit cards for bad credit.

Who needs a secured credit card?
You may need a secured credit card if you have no credit or bad credit history.  Since approval is not based on your credit rating, anyone can easily open a secured account with not hassle.

What is a secured credit card?
This type of card requires the submission of cash deposit in the cardholder’s account.  The amount deposit ranges from $200 – $500 and up.  Typically, the value of your deposit will also determine your borrowing limit.

Take note that a secured card is different from a debit card.  While both require cash deposit, only a secured card provides the cardholder with a credit line.  That means it can be used much like a regular credit card where you can pay only the minimum due and carry over your balance for the next billing period.

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Should I apply for a secured credit card?
Having a spotty credit or no credit history may prevent you from getting approved for standard credit cards.  To build credit, you may start with a secured account.

It is important to choose a secured card Issuer that will report your payments to the three major credit reporting agencies as it is the only way to build credit. By regularly using your secured card and submitting payments on time, you can build-up a solid foundation or repair damaged credit history.

What factors should affect my choice?
In choosing a secured credit card, you need to be very particular about the rates and fees.  Understandably, credit cards for bad credit may come with slightly higher fees than regular credit cards.  However, by doing research, you can find Issuers that offer a reasonable credit card deal.

[Article:  Secured Credit Cards – Tools to Good Credit]

Aside from the fees, consider the conditions of the credit card Issuer on specific situations.   For example, will you be able to upgrade to an unsecured account after proving your capability to make payments?  How long will it take for you to qualify for an upgrade?

How can I rebuild credit with my secured credit card?
Since payment history makes up 35% of your FICO score, you should strive to be consistent and prompt in paying off your balances.  Furthermore, just storing your secured card in your wallet will not improve your credit rating.  You will need to use it regularly to raise your score.

Does that mean you should carelessly use your credit card for all your purchases?  Apart from being an active credit card spender, you need to be a good payer as well.  Thus, keep your purchases minimal so you can pay your monthly balances in full and on time.

It is also recommended that you check your credit card bills regularly to make sure that there are no unauthorized charges in your account.  Get a copy of your credit report at least twice a year so you can keep track of your progress.



About the Author
Melanie Mathis is a credit analyst and a writer for 8 years. She has been participating in the programs of NHBS, Inc such as their continuous effort in giving out Free Credit Repair and Building Ebook. NHBS also has a list of recommended secured credit cards
Copyright 2010.

About Melanie Mathis

Melanie Mathis is a credit analyst and a writer for 8 years. She has been participating in the programs of NHBS, Inc such as their continuous effort in giving out Free Credit Repair and Building Ebook. Connect with Melanie Mathis on Google+

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