Knowing What to Look For With Secured Credit Cards

Secured credit cards offer a way for one to either build or rebuild their credit. They are basically like unsecured credit cards except there is a collateral deposit to cover the balance should the cardholder go into default. It is a simple concept really and it allows many with past bad credit problems a second chance to turn things around. But there are some things you should watch out for and consider before getting a secured credit card. Here are a few:

Watch out for secured credit card scams. These are usually companies that will run an ad on television appealing to those with bad credit because of bad luck. Remember that if the offer is too good to be true then it should be one of your clues that it is a scam. If they promise that your good credit will be restored merely by having a secured credit card then avoid them. There is only one way to restore good credit and that is by having a consistent history of borrowing and repaying—simple as that. Always keep it in the back of your mind that people trying to reverse a bad credit history are targets of scam artists.

What are the fees? Secured credit cards offered by less-than-reputable credit card companies will usually have extremely high fees. Approval is pretty much guaranteed but only after you are drained of money that could have been used for a deposit and lower fees with a reputable company. Some of them even advertise these cards and get you to call a “900” number which is not toll-free. They will keep you on the line making other offers while the meter is running and you are stuck with a high telephone bill.

Evaluate the amount of the security deposit required and how much of a credit line you will get. Keep in mind that if you deposit $1,000 that you will not necessarily have a $1,000 credit line. Secured credit card issuers will typically grant a credit line based upon 50 to 100 percent of the deposit amount. This will be money that must remain on deposit and cannot be used towards any payments on the secured credit card. In other words, it is not like a prepaid or stored value credit card.

Does the financial institution offering the secured credit card give information to the major credit reporting agencies? There are three major credit reporting agencies: Experian, TransUnion, and Equifax. It’s easiest to make a decision on a secured credit card if the financial institution discloses up front that they do in fact report to these agencies. The scam cards may not report at all.

Make sure the secured credit card is offered through a reputable financial lending institution. These are from the bank names that you know so well. Reputable banks do not put the hard sell on you with promises of fixing all of your credit problems. The reputable companies are up front about everything. In other words, you do your part (the deposit and good management) and they will do their part. Watch out for secured credit cards that will eat up your initial credit line with “fees” before you even had a chance to use them or pay them off.

If you are interested in knowing more of what to look for with secured credit cards, visit US-CreditCards.com, a website with everything you should know about secured and other types of credit cards.