How Does a Secured Credit Card Work?

Secured credit cards are primarily used to help people build credit. But how does a secured credit card work? Well… like any other regular credit card, a secured credit card comes with a credit line; as such, any payment activity is reported to the major credit bureaus. However, unlike a typical credit card, a secured card requires you to provide a security deposit equal to the card’s credit line.

If you want to raise your credit limit, you’re typically required to increase your deposit — but some lenders will raise it after you’ve established yourself as a responsible borrower.

You should consider getting a secured card if:

• You’ve been unable to qualify for a regular credit card
• You have a hard time managing your finances
• You’re looking to establish or improve your credit

On the other hand, you should avoid getting a secured card if:

• You have trouble controlling your spending
• You lack the discipline required to pay off your credit card bill in full on a monthly basis

Photo Credit: GotCredit