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Video: Secured credit cards, explained

Summary

If your credit score is low, you can build your credit by using a secured credit card

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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.

See related:Secured card may be best when on a fixed income, New to credit? Build score with car loan, secured card, 9 things to know about secured cards

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Credit Card Rate Report Updated: May 23rd, 2019
Business
15.61%
Airline
17.50%
Cash Back
17.60%
Reward
17.62%
Student
17.79%

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