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The Truth about Secured Credit Cards

By: Michael Millington

Credit cards come in many forms. There are cards that can satisfy almost any financial need one might have. With varying levels of credit worthiness, however, it is harder for some to get be accepted for any credit card. If you have poor credit or no credit, applying for a new line of credit can be a depressing endeavor. Secured credit cards were conceived for this very reason. Here’s what you need to know about secured credit cards and how might they impact your financial standing.


What is a secured credit card?

A secured credit card works the same as a regular credit card in many ways. From the look of most secured credit cards, you would not be able to tell them apart from any other credit card. Visually, there are normally not any identifiers that make secured credit cards recognizable. This might allow some people to feel better about using a secured credit card without feeling judged by others. The main reason for this is because secured credit cards are intended for those whose credit rating prevents them from getting a better credit card.

The main difference between a secured credit card and an unsecured card is the fact that a secured card will require some form of deposit to open the account. This allows people who ae looking to build (or rebuild) credit to have a line of credit to start with. Generally, the amount of money you deposit equals the line of credit you will be extended. This is how the card can be considered as “secured”.

Some secured credit cards have the added incentive of becoming regular, unsecured credit cards should the cardholder satisfy certain requirements or a certain amount of time has passed. You might have your initial deposit returned to you and continue on with a regular credit card from the same credit provider. This can help to form financial habits that will lend themselves well towards future dealings with credit.


What should you know about secured credit cards?

Aside from the fact that you must deposit a set sum of money to begin with, secured cards also have other factors that set them apart from regular cards. Regularly, secured cards have higher interest rates than regular cards. Even with a regular card, there would be a considerable jump in interest rate when certain cards are involved. Those with less-than-stellar credit might be forced to deal with higher interest rates until they are able to demonstrate sound behavior with their credit.

One common misconception is that the initial deposit acts as a cushion of sorts to your extended credit line. In essence, your initial deposit has no bearing on your payments to your credit balance. It only acts as a cushion for the creditor if a cardholder falls delinquent on their payments. Should the creditor decide that the account has gone into default, the initial deposit would then be used to help pay off the balance owed. It cannot be used in any other instance except if the card transitions from secured to unsecured, or if the account is closed in good standing.

Although your card won’t say anything about being secured to the outside observer, it will appear as a secured card on your credit report. In the grand scheme of things it won’t count against you in a negative way. Most secured credit cards are reported to the credit bureaus the same way unsecured cards are. Remember to inquire as to whether the secured card you’re looking to acquire is reported to the credit bureaus.


Secured Credit Cards vs Loans

Secured credit cards have similar attributes to some types of loans that are available from banks and certain lenders. The main difference resides in how much money can be made available to you through each form of credit. Both forms of credit can be obtained by making an initial deposit. The deposit for a secured credit card is normally much smaller than that for a credit building loan, but the amount of credit available to you would also be much smaller.

While making a deposit starts up both forms of credit, you can only utilize as much money as you deposit for a credit building loan. In some instances, a deposit for a secured credit card can be less than the total amount of credit that can be extended to you. Secured credit cards are preferred by many over other options because there is a smaller start-up fee to gain a line of credit.

Another misconception with secured credit cards is that anyone can get one, regardless of their credit history. In fact, an individual can still be denied for certain secured credit cards based on their credit report. Credit building loans are secured entirely by the deposit made at the beginning. This makes the use of a credit building loan slightly simpler than that of a secured credit card.


Secured credit cards are widely accepted as a method of building or rebuilding credit. However, even secured cards can become debt problems for some unlucky individuals, and it can add to existing, unsecured debt you may harbor. If you have a substantial amount of unsecured debt, don’t hesitate to contact Guardian Debt Relief to learn about your relief options. Our debt relief specialists are standing by, ready to answer any of your questions. Our consultation is free, so there’s no reason not to call. Take the steps necessary to free yourself from unsecured debt. Put your debt in professional hands and contact Guardian Debt Relief today.

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