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Asmentionedinanearlyarticle,therearetwotypesofcreditcards:securedandunsecured.Thisarticlewillexploresomeoftheissuesofsecuredcreditcards.

Whatisasecuredcreditcard?

Asecuredcardisacreditcardthatrequiresyoutodepositacertainamountofmoneyintoasavingsaccount,moneymarketaccount,orcertificateofdeposit.Theminimumamountusuallyrangesbetween$200and$500butthiswillvaryfromonecompanytoanother.Yourdepositisconsideredyoursecurityandsomecardissuerswillevenallowthedeposittoearninterest.

Theamountthatyoudepositintotheaccountisyourcreditlimit.Youshouldunderstandthatsometimesthelimitwillbeforthefullamountthatyouputintotheaccountbutwithsomecompaniesyourlimitmaybeapercentageofthetotalamountthatyoudeposited.

Asecuredcreditcardisnotadebitcard.Thisisimportanttounderstandbecauseiffullpaymentsarenotmadeeachmonth,interestwillbechargedontheoutstandingbalance.

Whoshouldconsiderusingsecuredcreditcards?

Ifyouhavenocredithistoryatall,usingasecuredcreditcardcanbeagoodwaytobeginestablishingyourcredit.Manyyoungpeoplewhoarejuststartingoutmaychoosethisasanoption.

Ifyouhavebadcredit,youmaywishtouseasecuredcreditcardtohelpyouimproveyourcreditscore.Inaddition,asecuredcreditcardmaybetheonlysourceyouwillhaveforobtainingacreditcard.Therearesometransactionsthatrequiretheuseofacreditcard.Thismightincludecarrentalsorhotelreservations.Ifyouneedtomakethosetypesoftransactionsandcannotgetanunsecuredcreditcard,thismightbetheonlywayyoucangetatruecreditcard.

Whattolookforinasecuredcreditcard:

InterestRate:Donotbefooledintothinkingthatbecauseyouhavenocredithistoryorabadcreditreportthatyouhavetosettleforexorbitantinterestrates.Makeitapointtoshoparoundforthelowestratesthatyouqualifyforbeforeyouapplyforasecuredcreditcard.

Fees:Paycloseattentiontoanyfeesthatwillbechargedtoyouortoyouraccountonceitisopened.Therearesomecompaniesthatwillchargeridiculouslyhighfeesthatwillreduceyourinitialdepositbeforeyouevenusethecard.Stayawayfromthosecompanies.Lookforcompaniesthathavenofeeswhatsoeverorforthosecompaniesthatchargeasmallone-timefeetosetuptheaccount.Annualfeesforattractivesecuredcardstypicallyrangefrom$20-$35.

Scams:Itissadtosaythattherearecompaniesouttherewhoareinthebusinessofrippingpeopleoff.Theypreyonthevulnerabilityofthosewhomaybeinacreditcrunch.Someofthethingstheydoincludepromisesofgettingyouquickcreditforaprice.Anotherpopularscamistoaskyoutocalla900phonenumberforsecretstogettingacreditcardorcreditrepair.Yourphonecompanywillchargeyouahighrateforusinga900numberandyounevergettheinformationthatwasoffered.

Thebestadvicetoavoidsecuredcreditcardscamsisthatifitsoundstoogoodtobetrueitis.Useyourcommonsenseanddonotbetakenbythesecrooks.

CreditImprovementIssues:Evenwithaverygoodpaymenthistoryonyoursecuredcarditcantakesmanymonthsbeforeyoubegintoseeimprovementinyourcreditrecord.Youhavetobepatientwhenrepairingbadcredit.Youalsohavetobesmart.Makesurethatthecompanythatissuesthesecuredcreditcardtoyouwillreportyourgoodpaymenthistorytothethreebigcreditreportingagencies.Notallcompaniesreportandiftheydonotreportyouaresimplywastingyourtime.

Keepinmindthattheywillalsoreportyourbadpaymenthistoryifyoudonotpayontime.Becarefulandmakeyourpaymentsontimeeachandeverymonth.