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Little-Known Facts About Secured Credit Cards

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By Andrea

Thinking of getting a secured credit card? Wondering what your rights and obligations are?

are you thinking about getting a secured credit card?

Here’s everything you need to know about secured credit cards, plus tips to determine if you really need one or not…


Secured vs Unsecured Credit Cards

According to the Federal Trade Commission, a secured card requires you to open and maintain a savings account as security for your line of credit. An unsecured card does not.

While you never have to pay upfront money to get an unsecured credit card, in order to get a secured credit card you do need to place money into an account (a deposit) and pay up to hundreds of dollars in fees.


Here are some super helpful facts about secured and unsecured credit cards:

  • Should you default on your secured credit card, the credit card company will take your deposit to pay off what you owe.
  • If you default on an unsecured credit card, the credit card company will hire a collection agency to recoup what you owe them, if they can recoup it.
  • You should try to apply for an unsecured credit card before settling on a secured credit card.
  • Secured credit cards are for people whose credit is too bad to get an unsecured credit card.

Many believe that if you have no credit history then you should apply for a secured card. However, most peoples’ credit is not as bad as they think.

They let embarrassment prevent them from trying. You may be able to get at least a credit card with a low balance that will allow you to do things such as rent cars, reserve hotel rooms, and other things that credit cards are required for. (You will never know if you don’t try!)

Here are some good tips to build credit with a secured credit card.


Facts About Secured Credit Cards

Your limit on a secured credit card credit ranges from 50% to 100% of your deposit account. In other words, if you deposit $1,000 into an account, then your credit line will be somewhere between $500 and $1,000.

You will pay application and processing fees, as well as interest, on your secured credit card. Those fees are typically higher than with an unsecured credit card.

Unfortunately, there are many marketing secured credit card scams. Remember, if it seems too good to be true it probably is.

For example, some secured credit cards are not major credit cards. Instead, they can only be used with a specific catalog that sells a bunch of stuff you don’t want or need. This is often not disclosed in advance.

Likewise, be wary of dialing ‘900’ numbers to apply for a credit card. Some secured credit card companies charge anywhere from $2 to $50 for those calls.

Here’s one opinion on when you should cancel a secured credit card.


Should You Get A Secured Credit Card?

Personally, I don’t see the value in getting a secured credit card. After all, if you have the money for the deposit to secure the card, then why bother with all the interest payments?

Still, there are some reasons why you might want a secured credit card.

For example, you may want a secured credit card if:

  • You have no credit history.
  • You have a poor credit rating.
  • You’re a member of a credit union that offers secured credit cards for low interest rates.
  • You’re a student.
  • You want to build a solid credit history

Still, always attempt to get an unsecured credit card first.

A secured credit card actually does come in handy for someone who is trying to rebuild their credit history. There are some banks with secured credit card products that help clients achieve this goal. They also have several credit card options and use the secured option only when absolutely necessary.

Here’s Bankrate’s listing of secured credit card opportunities.


More Helpful Credit, Secured, & Unsecured Credit Card Information