Secured Credit Cards

Written by Jared Vincenti
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The majority of credit cards are unsecured cards. That means that the bank or business issuing the credit card is loaning you the money you spend with the card based only on your credit score. They require no deposit or down-payment of any kind. Because of this, though, you can get in trouble with an unsecured card if you happen to run up more of a bill than you can afford.

What are Secured Credit Cards

A secured card, on the other hand, is a credit card that requires a deposit for approval. Secured credit cards are usually issued for those with bad credit as a means of repairing their credit history. The creditor will take a sum of money and put it aside in an account for the applicant.

The sum required for a secured credit card is usually 100 to 150 percent of the value of the card. For example, to get a secured credit card with a credit limit of 2,000 dollars, you would need to deposit between 2,000 and 3,000 dollars. This money is returned to you when the card is canceled, but the creditor holds it while the card is valid.

The account is not touched unless a payment is not made. In this case, the creditor will take the amount of the missed payment out of the account, and apply it towards the card. Thus, the card is almost always guaranteed to be paid, and is a great way of rebuilding damaged credit. Once you have improved your credit score with a secured credit card, you can apply for an unsecured card and have your deposit returned to you.

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