Secured Cards
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 $300 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.