Can't Get a Credit Card? Apply for a Secured Credit Card Instead

By Mario AL Churchill
A credit card is one of those ubiquitous inventions of the modern age that refuses to quit. In fact, it has made itself so necessary in our lives that we need one to rent a car, book a hotel room or just to buy a comicbook online. More than that, credit cards are one of the ways creditors take a peek at our credit history with and they can actually make or break our chances for a good loan, an apartment or a job. So what do we do if we've torn our credit to pieces? We turn to secured credit cards.
Secured credit cards are a great substitute for regular credit cards. Whether you have poor credit badly needing repair, can't get a credit card or are new to the credit scene, a secured credit card can help you re-build or establish your credit.
How does it work?
A secured credit card is a cross between a credit card and a debit card. It requires collateral in the form of cash deposited in an account. That amount then functions as your credit line. So if you deposited $700 in your account, you can use your secured credit card to purchase items up to $700, nothing more. The catch is, you have to pay it back.
Some banks offer to give you more credit as a reward for being a good client (i.e., you pay your bills on time) or maybe allow you to charge up to a certain percentage more than your deposit amount. You only need to pay a small interest rate to cover for that type of usage.
What's the minimum deposit amount?
Depending on the type of card you chose or on the banking institution, most secured credit cards will require a deposit starting at $300. There is no limit to how much you want to add later on.
What to look for in a secured credit card
Compared to unsecured cards, secured credit cards require annual fees and come with higher rates. If you're shopping around for a secured card, make sure to get one that has no application fee. You will have to pay an annual fee so choose a secured card that does not ask for a prohibitively high charge.
Watch out for secured credit card agreements that hide fees or ridiculous add-ons that you don’t really need. An example is one where a credit card company will approve your secured card application provided you sign up for a monthly insurance policy that costs $50.
Where can I apply for a secured credit card?
Not all banks offer secured credit cards but you can still check out your local banking institutions if it's still part of their product line. You can also check with your credit unions since many of them offer these cards to members only.
Using secured credit cards to build credit
While most banks target clients who have never had credit before as the main users for secured credit cards, many consumers use secured credit cards to help re-establish their credit. To do this, consumers need only to use their secured cards and ensure that the bill gets paid each month. By establishing their reliability, the consumer establishes positive credit.
The future of secured credit cards
Secured credit cards are still the choice of many card holders, but many are giving up their secured cards in exchange for unsecured cards. Unsecured cards don’t require cash collateral, which accounts in part for their attractiveness. A secured credit card is still a great choice, especially for people who are still building credit or for those who are trying to rebuild theirs.