Secured Credit Cards

Secured credit cards offer credit to persons with poor or even no credit.

• Poor credit means that a person has had some negative issues in it's credit history. Most likely payments were no made in full or not made at all, or that a person may have even filed bankruptcy to clear all credit obligations.
• No credit means that a person has absolutely no credit relevant information at any of the existing credit bureaus. Therefore a bank may not easily evaluate the credit offer a person, as no information is available.

A secured credit card is a type of credit card, which is secured by a deposit account (e.g. special savings account) by the cardholder. The cardholder deposits between 100% and 200% of the total amount of the desired credit amount.

If a cardholder deposits $2000, he may get a line of credit between $1000 and $2000.

If such an deposit is put into a special account of the bank, even lower deposits may be required.

There is no difference in the payment of secured credit cards vs. non-secured cards. The security is not meant to be used a regular payment of purchases made on the card, but rather a backup, if the cardholder defaults. Therefore the overall risk for the bank is nearly nonexistent.

The advantage of the secured card for an individual with negative or no credit history is that most companies report regularly to the major credit bureaus. This allows for building of positive credit history.

Secured credit cards are available with both Visa and MasterCard logos.

Offers of secured credit cards by major banks:

• Bank of America
  
• Wells Fargo