A financial option for people with bad or no credit

What is a secured card? It’s a lifesaver option if you’re in financial trouble, or an individual who is looking to build or rebuild your bad credit. We’ll discuss them today.

Plus, you can even find some incredibly good secured cards out there in the market.

Let’s dive into all the details so you can make an informed decision about whether this type of card is right for you. Stay with us!

How do secured credit cards work?

A secured credit card requires that you put down some cash upfront as collateral in order to open and use it. 

This money will be held by the credit card issuer, and they will extend you a line of credit equal to (or slightly less than) the amount of your deposit. 

Typically, that means if your deposit was $500, your line of credit would be $500 or $500 less the annual fee. 

You can use this line of credit just like any other type of credit card, but since it’s secured, there is less risk for the issuer. 

Secured cards are designed for people with bad credit that want to improve their scores or people with no credit at all that need to start pointing for credit in the market.

We put secured cards in a nutshell by making a list of pros and cons with the most important details about this type of card. Check it out. 


Here are the main advantages of using secured cards.

Helps build or boost credit score

One major benefit of a secured card is that it helps individuals build or rebuild their credit score.

If used responsibly – meaning making payments on time and not spending more than you can afford – it can go a long way towards increasing your overall score over time. 

Typically don’t require minimum credit scores 

Additionally, because these cards require collateral up front, most issuers don’t look at applicants’ past financial history when deciding whether or not to approve them for the card.  

That makes them much easier to qualify for than traditional unsecured cards. 

Reports to credit bureaus 

Secured cards typically report your payments to the three major credit bureaus across the U.S.: Experian, TransUnion, and Equifax. 

These bureaus are responsible for analyzing your creditworthiness. They will check every transaction in your credit in order to boost or decrease your score. 


You can see below the disadvantages of using this type of card.

Requires a security deposit 

You’ll need to put down a security deposit in order to open an account with a secured card. 

High fees

Secured cards generally have higher fees, including an annual fee, and monthly maintenance fees. 

Lower credit limit 

In addition, secured cards typically have a lower credit limit than unsecured cards, because their goal is to rebuild credit. 

You can end up damaging your score 

And finally, if you don’t use your secured card responsibly, you could actually end up damaging your credit score instead of improving it. 

Rates and fees

Now, we’ll give you a better understanding of how the rates and fees of secured cards work. Read below.

1. APR

The APR is the interest rate you’ll pay on any outstanding balance you carry from month to month. 

Secured cards typically have higher APRs than unsecured cards.

2. Annual fee

Most secured cards come with a high annual fee, which is charged annually for the privilege of using the card.

3. Late fee

If you make a late payment, you may be charged a late fee. Late fees are typically around $25-35.

4. Foreign transaction fee

If you use your secured card to make a purchase in a foreign currency, you may be charged a foreign transaction fee. This fee is typically around 3%.

5. Cash advance fee

Taking out a cash advance on your secured card will typically incur a cash advance fee, which is usually around 5% of the amount withdrawn. 

Secured cards also generally have higher APRs for cash advances than for purchases.

Credit score necessary to apply

Most secured cards require a fair or poor credit score, but there are a few that accept applicants regardless of their scores.

Secured vs. unsecured credit cards: what is the difference?

Did you know there are unsecured cards? Learn the main difference between secured and unsecured cards

1. Security deposit

A secured credit card requires a security deposit, which acts as collateral in case you default on your payments. 

An unsecured credit card does not require a security deposit. Instead, your creditworthiness plays a major role in approval. 

2. Credit limit

Your credit limit is typically equal to your security deposit on a secured credit card. 

With an unsecured credit card, your credit limit may be higher or lower than your deposit, depending on your creditworthiness, and the type of card.

3. Interest rates

Interest rates on secured credit cards are typically higher than on unsecured cards. 

This is because there is more risk involved for the lender with a secured card.

4. Rewards

Some secured credit cards offer rewards programs, while most do not. 

Unsecured credit cards, on the other side, typically offer more robust rewards programs than secured cards, such as miles, points, and discounts. 

5. Annual fees

Annual fees are generally charged on both secured and unsecured credit cards, though they may be higher on some unsecured cards, depending on the perks that come with it. 

When choosing a credit card, it’s important to consider your needs and financial situation to decide whether a secured or unsecured card is right for you.

Is a secured credit card the best option for you?

It depends on your credit history. If you have a good credit history, then a secured credit card may not be the best option for you. 

A regular, unsecured credit card may be a better option because it typically comes with a higher limit and may offer lower interest rates.

If you have a bad or no credit history, then a secured credit card may be the best option for you. 

A secured credit card is a great way to build your credit history because it reports your payment history to the major credit bureaus. 

This means that if you make on-time payments, your credit score will improve over time.

How can you improve your credit score using a secured card?

To ensure that you get the most out of having a secured card and improve your credit score in the process, here are some tips you should follow: 

1) Make sure you pay off your monthly balance in full each month

Otherwise, interest will start accruing and could potentially raise your overall balance beyond what was initially deposited into the account. 

2) Use only 10-30% of your available limit per month

This ratio is recommended by experts because it shows potential lenders that you are able to use money responsibly without overspending or maxing out your limit. 

3) Pay bills on time every month

If you miss payments or spend more than what was agreed upon in terms of monthly spending limits, it can actually hurt more than help when building up your credit score. 

By following these simple tips mentioned above, you can make sure that having a secured card works for you. 

Building good financial habits now will set you up for success later down the line.

Mubashir Ali
Author: Mubashir Ali

I am Mubashir Ali.I am SEO expert.Internet Entrepreneur | Digital Marketing Expert | Marketing Consultant | Email: [email protected] Website: https://ventsmagazine.co.uk/

About Mubashir Ali

I am Mubashir Ali.I am SEO expert.Internet Entrepreneur | Digital Marketing Expert | Marketing Consultant | Email: [email protected] Website: https://ventsmagazine.co.uk/

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