Secured Credit Cards

Most credit cards are a form of unsecured lending. There is no house or car backing the loan the bank offers with a credit card, so the bank stands to lose all of its money if you were to default or declare bankruptcy. When you've had credit trouble in the past, the bank may be no longer willing to loan you money unsecured. When this is the case, you can begin to rebuild your credit using a secured credit card.

A secured credit card account requires some form of collateral to open. The collateral is usually equal to or greater than the actual credit limit on the card. Normally, secured credit cards require a cash deposit that is held on reserve at the credit card company, but other items such as cars, jewelry, boats or other valuables can be used to secure the loan.

A secured loan is used to build or rebuild credit and the credit limit on the account will be extremely low and have a high interest rate. There are likely to be additional charges and possibly an annual fee as well. All of this is simply the cost you pay to get your credit repaired and in return many secured credit cards report your success regularly to the credit bureaus.

Secured credit cards are a means to help those with no or poor credit, but are unattractive to anyone able to secure another form of credit card.