If you can’t qualify for a standard credit card due to your bad credit status, a secured credit card is your best option. This type of credit card gives people with a credit history problem the opportunity to work on improving their credit status by applying for a new account.

What are secured credit cards?

Secured credit cards require the submission of a cash deposit to the cardholder’s account. The security deposit can range from as low as $200 to $1,000 and above depending on the credit card company. Usually, the value of your security deposit will determine the credit line of the cardholder so if you need a higher credit limit, be prepared to submit the necessary cash value.

Why do issuers of secured credit cards require a deposit? Requiring the cardholder to submit funds in his/her account gives the credit card issuer some security should a customer defaults from his/her debts. Thus, the risk of allowing someone to open an account is lessened despite having bad credit.

Timely payment is a must for all holders of bad credit credit cards. Credit cards for bad credit are just tools yet it is still up to the cardholder how well he/she can manage charges. To be sure that you’ll be making progress with your credit status, find a secured credit card that will regularly report your payments to the major credit bureaus. After 6 months to a year of consistent payment, you should request your credit card issuer to give you an upgrade to a non-secured account.

Features to Look for in a Secured Credit Card

Avoid bad credit credit cards that promise low APR and yet make up with hidden charges. Add to this, watch out for secured cards that promote a low introductory interest rate which is subject to change at any time after you’ve signed up for the card.

The ideal credit card for bad credit should help you save your money from paying additional fees such as application fee, activation fee, annual fee, etc. If your chosen secured credit card carries an annual fee, see to it that the amount is reasonable for you to pay every year.

Understandably, credit cards for bad credit have their limits. For example, secured cardholders may be given a lower credit line because of their credit rating. The penalty fees such as over-the-limit fee and late penalty fee may be higher than the standard costs. This is why, it’s important that you are clear about the exact terms and conditions of your secured credit card.

Although a secure card gives you the option to carry over balances from one billing cycle to the next, it’s best to keep your balances at par and to pay them off in full each billing period. By doing so, you can save yourself from the additional interest rate costs and more importantly you can save yourself from the risk of incurring bad debt.

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 Bad Credit Personal Loans.
Copyright 2010.