What are Secured Credit Cards

Secured credit-cards

Secured credit-cards are another very popular breed of credit-cards. Secured credit-cards, as their name suggests, are secured. Secured for the credit-card supplier, that is.

Secured credit-cards require you to open an account with the credit-card companyand maintain some cash balance in that account. This cash balance acts as a security for the supplier of secured credit card.

Your credit limit is dependent on the amount you hold in the account that you have started with the supplier of secured credit-card.

This is typically between 50 to 100% of your account balance. So in that sense, secured credit-cards are not really credit-cards (since they do not offer you any credit really). For this reason, the secured credit-cards are every so oftentimes also referred as debit cards.

Why is the concept of secured credit-cards so determining? As we know, debt is a raging problem which is caused by improper usage of credit-cards.

Such people end up spoiling their credit rating to an extent where they cannot get another unsecured credit-card (that is what we call the usually used credit-cards).

Even after they have paid off their dues and cleared their debt, their credit rating still haunts them. For such people, secured credit-cards could be the only card to get if wanting to repair their credit.

Secured credit-cards present them with an opportunity to not only get a credit-card in the 1st place but also to improve their credit rating by using the secured credit-card in a disciplined way (paying their dues in time, self-restrained spending, utilizing a maximum of 70% credit limit etc etc).

As they continue with these good habits, their credit rating gradually improves over a period of time. Hence secured credit-cards provide them with the means of rectifying their mistakes (credit rating).

It's not just the people with bad credit rating who go for secured credit-cards. A few people go for secured credit-cards because they do not want to bother with credit-cards bills. Then there are a few who just do not like to borrow money (even if it means borrowing from a credit card supplier by using their credit-card).

In any case, such people are rare.

A few people just go for secured credit-cards because they have heard a lot of horrifying stories on credit card debt maybe someone from their family or one of their friends was devastated by credit-card debt and they do not want to repeat the mistake. So they decide to go for a secured credit-card.

Whatever be the reason for going for it, the secured credit-cards are surely popular too.

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