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Secured Cards
"Despite the pile of offers you might receive from credit
card issuers, without a credit history, getting that first
credit card can be impossible--no credit history, no credit
card; no credit card, no credit history."
- Lorayne Fiorillo, author of
Financial Fitness in 45 Days
At the low end of the credit scale are secured credit cards.
The best part of a secured card is they look like every other
MasterCard and Visa, only with one distinct difference. It's
secured by money you have on account with the issuing bank,
either in a savings account, money market fund, or CD.
You may apply for a secured card by opening a bank account
with a deposit anywhere from $500 to $5,000. Your credit limit
will be your deposit amount, and if you fall behind on your
payments, the card issuer can take payments from your account.
Advantages of a Secured Card:
- You're restricted from spending more than you have on
deposit.
- Your bank may pay interest on the money you have on deposit.
Disadvantages of a Secured Card:
- Some banks charge exorbitantly high application and annual
fees.
- Some banks pay no interest on the bank deposit securing
the card.
- Not all banks make reports to credit bureaus regarding
secured cardholders, so find one that does.
- Some cards actually have the humiliating word "secured"
on the front of the card-there are plenty that don't, so
inquire first.
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