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Build Your Credit with a Secured Credit Card

Updated: Jun 18, 2019

A smiling woman holds up the back of a secured credit card.

Whether you’re a young adult just starting out in life and have no credit, or you’ve been around for awhile but have gone through some hard times that have impacted your credit score negatively, a secured credit card may be just what you need.

A secured credit card is a credit card that requires a deposit that the bank keeps until the account is closed. While the credit card is open, you may use it like a regular credit card. You can charge items on it and either pay off the balance in full each month, or make the minimum payment by the deadline.

So, what makes a secured credit card a great option?

  1. You can get approved for the card even if you have no credit or bad credit. A secured credit card can be approved because your deposit eliminates the risk to the lender.

  2. As you pay on time each month, your card activity will be reported to the credit bureaus which will build or increase your credit score. After you have been using the card responsibly for a while, you can apply for a regular credit card and get approved.

  3. If you default on the amount you owe, you will not be sent to collections – unless the amount you owe is more than your deposit. The bank will just keep your deposit. (However, if you make late payments, they will show on your credit report.)

Words of Caution

A secured credit card offers many advantages but there are a few things to watch out for.

  1. Some secured credit cards have application fees and annual fees. Take some time to shop for lower fees.

  2. The card may have a high interest rate. (This will not be an issue if you pay off the balance in full each month, which is highly recommended.)

While these words of caution need to be considered, the benefits can far outweigh them. Later on, if you are in urgent need of a loan to buy a car or house, or have an emergency, these fees will have been well worth it. If a secured credit card this seems like a good choice for your situation, call us at (210) 223-6561.

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