Published On: Tue, Oct 27th, 2015

5 Things You Must Know About a Secured Credit Card

Generic credit card picture

​A secured credit card is an alternative option for individuals who have less than perfect or no credit history at all.  A secured credit card is slightly different from a regular credit card, in the sense it requires a cash collateral deposit for the card to be issued. If you decide to default on your account, that protects the bank against any possible risk of the defaulted amount. The cash collateral deposit amount will vary by card issuers. According to, often the credit limit is 50% to 100% of the security deposit and some card issuers may allow equity in a home to be used as the homeowner’s security for a secured credit card. A secured card functions just like a regular credit card.  Cardholders receive monthly bills, are required to make on time payments or be penalized with fees. It’s also important to note, secured credit cards are useful in establishing credit history when they are reported to the credit bureaus, allowing the card holder the ability to start building and maintaining good credit.

Secured credit cards have gotten a bad reputation considering how some companies pimp consumers by extorting clients because of their situations– usually charging excessive interest rates and outrageous fees. With a little research, it’s possible to find a reputable company that offers the right products to meet your needs. Card holders can also enjoy some of the benefits just like any other typical credit cards.

5 Things to Consider:

1. Shop around for a card that has no application fee. Most secured card will impose an annual fee, the amount varies.

2. Understand and fully read the fine print.

3. Higher interest rates. Secured credit cards do not offer competitive interest rates due to high risk of default. To avoid high finance charges, be sure to pay your balance in full each month.

4. Be sure the issuer reports to the credit bureaus. A secured credit card can help you establish or re-establish your credit if report accurately.

5. Understand the security deposit requirements. Some secured credit cards will grant a credit limit that matches your deposit.  Additional, some secured cards will allow you choose your deposit, which could mean a higher credit card limit.  Lastly, some companies will place your deposit into an interest-bearing savings account. So be sure to review in details the security deposit agreement and terms.

If you’re a credit union member, inquire within about a secured card. Many credit unions offer secured cards to their members at lower interest rates and will typically waive annual fees.

Source: Natasha Campbell

Natasha Campbell
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About the Author

- NATASHA M. CAMPBELL is a passionate certified educator specializing in curriculum and development, personal finance coach, licensed real estate agent and founder of Lifestyle Success Unlimited, a financial education company. Natasha holds a Master’s degree in Business Administration and has earned a Bachelor's degree specializing in Finance and Real Estate. Natasha is the voice for transformational change in the area of wealth. Natasha's intention is to get you “launched, jump started" or “unstuck” to clear out any resistance, obstacles, or limitations that are standing in the way of you reaching your success. Natasha's journey as a financial educator has appeared in several media outlets including U.S. News, Yahoo Finance, Daily Finance, Go Banking Rates, and more.

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Did you know?

African Americans are significantly more likely to have some type of debt (94%) compared with the general population (82%). Credit card debt, student loan debt, and personal loans are all significantly higher in the African American community.

Source: Prudential’s 2013 "African American Financial Experience" study