Credit Glow Up: Secured Credit Card

• If you have no credit or a low credit score, then a bank sees you as a riskier client and will most likely not lend to you. 
• Some banks and credit card companies will let a more risky applicant open a secure credit card. 
• With a secure credit card, you pay a deposit, and in turn, the bank allows you to open a credit card. The deposit backs the bank up if you do not keep up with your monthly payments.

​How A Secured Credit Card Works

If you have no credit or a low credit score, then a bank sees you as a riskier client and will most likely not lend to you. Some banks and credit card companies will let a more risky applicant open a secure credit card. With a secure credit card, you pay a deposit, and in turn, the bank allows you to open a credit card. The deposit backs the bank up if you do not keep up with your monthly payments.
 

Even though you placed a deposit,  you will use the credit card like a normal card. You make charges on the card and make monthly payments to the credit card company. Some companies will return your deposit after a certain number of on-time payments. Other companies will not return the deposit until you close the account.

Watch Out For This

1. Choosing a card with a high deposit. Some credit card companies will allow you to open a secured credit card with as little as $50. If you do not have a decent emergency fund, then don’t invest much-needed money into a secured credit card.

2. Late payments. If you pay late, it will still hurt your credit score even though the credit card company holds onto your deposit.

Why It Wouldn't Be Worth Having a Secured Credit Card
 

You already have active lines of credit. The secured credit card is most helpful if you have no active credit lines on your credit report. If you have active loans or credit cards, it is more helpful to take the deposit you would use for a secured card towards paying down your current balances.