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How Does a Secured Credit Card Work?

By Len Penzo

credit card basicsSecured credit cards are primarily used to help people build credit. 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

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