How To Tell If You Need A Secured Credit Card


If you are in the process of repairing your credit, then getting a secured credit card is an excellent option.

In the past, secured credit cards were viewed warily by lenders; they were a mark of mis-managing your debt. Today though, secured credit cards do not really have the same stigma attached to them, and in some cases they can be a very positive sign that you are taking steps to re-build your credit after a disaster.

You are an excellent candidate for a secured credit card if you have ever been through any of the following:

  • Bankruptcy
  • Judgments
  • Credit Card, Loan, or Debt Charge-offs
  • Frequent Late Credit Card or Loan Payments
  • Unpaid Medical Bills

There are more reasons than ever before to take secured credit cards seriously. Here are just a few of the many reasons you will want to start with a secured credit card while you re-build your credit:

Secured Credit Cards have lower interest rates than bad credit, unsecured credit cards:

Yes, you can probably still qualify for an unsecured credit card of some sort, even with a bankruptcy. However, most cards that cater to people with low credit scores have high fees. It is not unusual to see a $250 application fee, and a $100 yearly fee coupled with a 20% (or higher!) interest rate on an unsecured, bad-credit credit card.

Secured credit cards, on the other hand, require $200 – $300 dollars to open, and you will eventually get that money back. They also usually have interest rates under 10%, and low, or no yearly fees.

Many secured credit cards do not report as “secured credit cards” on your monthly credit bureau reports. This means, that to a lender, those secured credit cards are exactly the same as having unsecured credit cards.

With a secured credit card, you can raise the credit limit any time you want to by depositing more money:

Now, this is huge. With most credit cards (especially if you have bad credit) getting a credit limit increase is like pulling teeth.

Thirty percent of your credit score depends on your debt-to-credit ratio. This means that if you ever charge more than 25% – 30% of your total available balance, your credit score will drop.

So, what happens if you want to put your monthly bills on your credit card to make things easier? Well, with an unsecured credit card, you would be out of luck. With a secured credit card however, you can total up the amount you want to charge each month, and figure out how much you need to increase your limit so that you stay under that 25% rule.

Secured Credit Cards act as a failsafe:

If you lose your job, or have trouble paying your bills, and cannot pay down your credit card, then you can use the money you have in your secured savings account to pay the balance on the card.

You will never again have to worry about defaulting on a credit card because the amount you borrow has been previously set aside. That is real peace of mind – especially if you have defaulted on a credit card before and experienced a number of collection calls.

Banks that issue secured credit cards are more likely to issue you unsecured limit increases, or an unsecured credit card after a couple of years:

If you have an excellent payment history with your issuing bank, wait a year or two, and see if they will issue you an unsecured credit card in place of your old secured one. You will then get your deposit back, and depending on the issuing bank, you may even be paid a small amount of interest on your original deposit.

All in all, secured credit cards are one of the best deals out there for people who are working to re-build their credit. With so many things in their favor, they really are the best place to start out.

Secured credit cards are also an excellent tool for people with no established credit history, or anyone who needs to be able to regularly increase the limit on their credit cards.

To find out more about which secured credit cards are available, and what their terms and interest rates are, please visit our secured credit card pages.

Have a question for us? Leave a comment below!

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4 Responses to “How To Tell If You Need A Secured Credit Card”

  1. Jason Paul Marshall Says:

    Today is December 6th, 2008 Saturday 1:43am PST USA,

    In reference to: “With a secured credit card, you can raise the credit limit any time you want to by depositing more money”

    Some people don’t know how important this is when they first apply for a secured credit card. In my case, I had TWO DIFFERENT SECURED CREDIT CARD COMPANIES renigh on their agreement to allow “deposits AT ANY TIME” to increase my credit lines; namely Associates National Bank/WAMU/CitiCards and First Premier Bank! And the condition was on the original application that I had submitted. What can I do when two banks had done this? Because I wanted to have lines of $5K or more SECURED by my deposits.

    So make sure you tell everyone out there how important (1) this issue of being able to make deposits AT ANY TIME to increase their credit line and also (2) they will want to plan ahead for the future by finding out what their deposit limit is such as $2K, $5K, or $10K.

    Jason Paul Marshall

  2. Jason Paul Marshall Says:


    (3) Eventhough some may keep secured deposits for the life of the Secured Credit Card (which seems to be rare these days), BEWARE of Credit Card Companies that (a) don’t have a time limit for holding onto your “security deposit” before it’s converted automatically to Unsecured credit card status. Because one of my two card companies had an application the year before I applied which said “18 months before converting to unsecured” whereas when I applied it said “at their discretion we will make unsecured”. And coincidentally afterward, I saw once again saw their application say the familiar “18 months”! SO DECIDE if you want your money back and if you do, similarly, don’t let the bank renigh!

    (4) And AVOID Credit Card Companies that have a “cash advance” limit; there are too many that allow cash advance limits equal to the credit limit. . .besides it’s your $5K or $10K dollars anyway!

    (5) AVOID Credit card companies and their “Credit Shields” or other credit protections BASED SOLEY ON THE REASON that you don’t want to be paying $20 to $40 dollars a month on your own cash especially if you think THE CARD COMPANY will never give you credit line increases or will use Overlimit accidents due to their “credit protection plan” fees so as to disqualify you from getting your CASH DEPOSIT BACK!

    Jason Paul Marshall

  3. S.McKay Says:

    The “credit crunch” has prompted nearly all major lenders to reduce available unsecured credit lines to 40% or less of what their value would have been four years or so ago. This greatly negatively affected my credit score at a time when real estate became very affordable in my area. A credit line secured by collateral cannot be summarily reduced, especially at critical times when other credit repair efforts may be thwarted by untimely and unjustified reductions in available unsecured credit.

  4. lauren Says:

    Just like anyone else, I’m having a hard time finding anything to help me out with paying my debt off while also raising my credit score. I really wish I could walk into a bank and be like, ‘I’m in need of a 30,000 dollar loan or credit card to pay off my debt. I can pay this back no problem with just one payment a month.’ But its not that easy. Unfortunately.
    My credit score is horrible!! It’s about a 450 and all I want to do is have something to pay off EVERY last part of my debt. Thats all I want in life right now. What is that I can do or apply for to be able to do make all the debt I have “disappear” in one day?

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