Rebuilding? Consider a Secured Credit Card

Posted on February 21 2007

While in the process of rebuilding your credit you may want to consider applying for a “secured” credit card.

A secured credit card is a credit card that is financially backed by a personal deposit. These credit cards act the same as traditional credit cards however in order to open one you must first send the lender a deposit for the line of credit in which you are requesting. As you make a purchase you will receive a statement and a minimum payment is required. If payment is not made or you default on your terms, the lender does not experience any loss. They will simply close your account and keep your deposit.

Why would you need a secured credit card? These cards have become more and more common due to the increase number of at-risk consumers. If you have had major credit issues (i.e. bankruptcies, judgments, collection accounts, etc.) in your past you have probably had a difficult time securing any revolving credit (credit cards or lines of credit). Secured credit cards have been introduced to assist people on the road to reestablishing their credit-worthiness.

If you are in process of trying to increase your credit score but experiencing a difficult time finding a lender that believes in your credibility you may be a good candidate for a secured credit card. These act as tremendous rebuilding tools for people that have bad credit.

In most cases your lender will refund you the deposit upon closing the account if you closed the account while in good standing. Most secured cards we see have a limit of anywhere between $200-$500.

If you feel you would like to know more about secured credit cards please feel free to visit with one of our counselors.

-Joe Larson FLCS Certified Credit Counselor