How It Works

• Most credit cards are unsecured. Banks take a gamble when issuing a credit card to an individual. If a person has bad credit, banks want to eliminate the risk. The solution is to have the potential card holder secure their own credit card by paying collateral. The desired amount of money is paid directly to the credit card company and placed in a saving account. The amount of credit available is equal to the deposit amount. The money in the account is used if the customer defaults on the card.
  
  

Improve Credit Score

• A secured credit card holder must make monthly payments on the balance. There will also be an interest rate. Secured credit card companies report to credit bureaus. As long as the customer pays their bill on time, keeps their balance low and maintains the account for a long period of time, their credit score should begin to rise.
  
  

Choosing a Secured Card

• Customers should consider the costs involved with a secured credit card. Most secured cards may require an annual fee, monthly fee and processing fee. Interest rates can also be high. When choosing a secured credit card, the customer should check to make sure the credit card company reports to the major credit bureaus.