Secured Credit Cards - How They work - Will They Work For You?

By Benjamin Wise

Secured credit cards look like regular cards, but they aren't technically the same. Because credit is essentially a loan extended to you by the card issuer, requiring you to pay it back on time, these cards aren't really proper credit cards.

If you pay off your conventional credit card withing a billing cycle, you won't have to pay any interest. However, you might still have to pay annual fees. The benefit of credit cards is that they allow you to buy things immediately, even ones you wouldn't necessarily be able to buy without saving up several paychecks.

That's hard to do if that 'thing' is fixing your car's transmissions or taking someone special on a weekend getaway. Credit cards are also a matter of massive convenience and prestige.

Being able to whip out the 'plastic' and make the transaction happen is often required to look like you've got your act together without carrying mass cash. This is why so many people use them every day!

However, if you've had some bad luck or made some purchases that were really too big to handle, you may no longer have the credit score to get a regular credit card. This is where a secured credit card comes in.

Using a secured credit card gives you all the benefits of an ordinary credit card, without having to deal with the downsides of having bad credit. What happens is that you put money on the card in advance, giving yourself a spending limit. This prevents the overspending problems that may occur with conventional credit cards.

This is also a great way to rebuild your credit if it's less than fantastic. Just make sure that the issuer of your card is providing reports to the major credit bureaus. While a secured credit card won't let you spend more than the cash you have on it, it still gives you all the convenience and other benefits of buying with plastic, plus allowing you to fix up your credit.

If you are considering a secured card to improve your credit, make sure they report your on-time payments to the credit bureaus - if not, it won't help your credit. If you're just looking for convenience and an insurance policy against overspending, any secured card will work, just make sure you pay as little as possible in fees!

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