Secured Credit Cards
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Secured Credit Cards
Most credit cards rely on your credit risk as their backing. That makes them unsecured, and that is why lenders require that you keep good credit if you want to use their cards on good terms. But if you do not have sufficient credit, you have an alternative: a secured credit card. Secured cards are easier to get than unsecured cards.
Things To Know
- Secured cards are easier to get than unsecured cards.
- Secured cards are tied to an asset of some kind.
What does "secured" mean?
To be secured means to be tied to an asset—a source of money that can be tapped if you should default. For example, when you get a loan to buy a car, the car is the asset that can be taken if you default on your loan. For secured credit cards, the asset can be a savings or checking account at your financial institution. You need to have sufficient money in the account to cover what you charge with the card. Thus, if you fail to pay on your credit card, the bank or credit union can take your deposit. This covers its risk.
You will want to maintain adequate funds in this savings or checking account. Failure to do so can result in penalties.
Where can you get one?
Many banks and credit unions offer secured credit cards. If you get one, use it regularly and pay off the balance each month. You will build up a credit history and eventually you may qualify for a regular credit card.