Video: Secured credit cards, explained
By Kristin Wong | Published: May 10, 2016
Security is typically a good thing. Security guards? Helpful. Security blankets? Cozy. Secured credit cards? Those are a little complicated.
With a normal credit card, you buy now, pay later. That fancy jacket you want? Hand the cashier your credit card, then pay your bill at the end of the month.
But let’s say you don't have a great credit score. You may be a student or new to the country, or maybe you weren't able to pay your bills in the past for some reason. Either way, a low credit score makes it hard to get any new credit or rebuild your score.
If that sounds familiar, secured credit cards might be an option. You make a cash deposit upfront – usually between $300 and $500 – and the bank uses this money as collateral. This means you’ll get a card, but if you don’t pay your bill, the card issuer will withdraw that money from your account.
The point of a secured credit card is to help you build credit, but some of them come with fees and super high interest rates, so you want to make sure to read the fine print and pay your balance in full every month if possible.
And really, that’s always good practice for keeping your finances, well, secure.
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