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When To Get A Secured Card

Aug 17, 2007
Many people who have never had a card before or who have a poor credit history can find it hard to get themselves a credit card. Even if you have a good job and a mortgage, if you have had problems in the past or no card previously, you might be turned down. If this is the case then there are alternatives open to you, such as getting a secured credit card. If you want to know more about getting a secured credit card, then here is some advice about secured cards and how they can benefit you.

What is a secured card?

A secured card is a card whereby you tie up a monetary deposit in a bank in order to get a credit card. Your credit limit is then 100-150% of this amount. There are no credit checks necessary for secured cards, and the more money you can tie up then the higher your limit will be. The amount that you tie up will earn interest, but you cannot use the amount at all whilst you are using the card.

Why get a secured card?

Of course, the main reason why people get a secured card is because they cannot get hold of a regular credit card. Secured cards give people with poor or no credit history the chance to build up a good credit record by spending on a credit card. If you spend wisely on the card and pay back your bill each month then you will quickly build up a better credit history and be able to get an unsecured credit card.

Advantages of a secured card

Apart from the fact that a secured card allows you to get hold of a credit card with the features of an unsecured card, it also allows you to earn interest on a lump sum of money. The money that you use to secure the card will most likely earn more interest than it would in a regular bank account, meaning that after you have finished using the card you will have made some money.

Drawbacks of a secured card

Of course, secured cards aren't for free, and they generally have higher interest rates than unsecured cards. This is not a problem if you pay your bill back in full each month. However, if you spend more than you can afford you will be subject to high rates, and you may find yourself unable to pay the amount back. This will hurt your credit history even further and make it even harder to get a regular card in the future.

Beware of scams

As with any other product that targets those with poor credit, there are a number of bad cards and scams around that you should avoid. Although many secured cards are reasonably priced, some charge extremely high annual fees, or make you sign up to an insurance policy that costs you as much as you can afford to spend on your card each month. Before signing up to any secured card, read all the fine print and shop around to find a deal that is fair and you can afford.
About the Author
Peter Kenny is a writer for creditcards-gb.co.uk Please visit us at Credit Card and Credit Cards
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