Credit Card Rewards

A secured credit card is “secured” by a special savings account that you open with the credit card issuer which acts as collateral for your credit limit. For example, if you deposit $500 in a secured credit card account you’ll then have a $500 credit limit. If you default, the credit card issuer simply takes the money out of your special secured savings account.

These types of credit card accounts are easily obtainable by simply filing out a secured credit card application and waiting a day or so till the creditor can run a credit check.

Unsecured credit cards are just that – unsecured. Meaning the individual fills out the unsecured credit card application and a decision is made based upon your credit report, credit score, and income. If approved, you’ll be offered a credit card with a credit limit based on your financial circumstances without having to put money into a special secured account.

You have a better chance of getting approved for a secured credit card versus an unsecured one because the lender is at a lower risk. It all depends on your credit history and how responsible you have been with your credit. But be careful. Not all secured cards are created equal. And to make matters worse, there are tons of banks out there pushing secured credit cards!

The best way to find the best secured credit card is to use this list of criteria that the secured card issuer needs to meet in order for you to consider applying. When researching secured cards, try to think about these 8 smart spending tips. Not many secured credit card creditors meet these, so you’ll be able to narrow down your options quickly.

Low interest rate is important. While researching secured credit cards came across one with an interest rate of 23.99% and then another with a low interest rate of only 9.25%. So look for potential savings, over several years a few percentage points could save you hundreds of dollars.

Next is secured credit card application fees. Again, I found some secured credit cards that have no application fees and one that had a $120 application fee! So do your homework and save big.

Another great tip is to make sure the secured credit card issuer reports to all credit agencies. You want to make sure your new payment track record is being reported to all three credit bureaus so that you can rebuild your good credit score as quickly as possible.

Lastly, be sure that you don’t apply for too many credit cards at once. If you do, it can hurt your credit score. That’s why it is important if you’re uncertain as to whether or not you will be approved for an unsecured credit card it may be better to apply for a secured credit card.