This article discusses what you need to know about these credit entry or reentry card options, how secured credit cards work, who uses a secured credit card account, how they can build credit, their pros and cons, and other related topics.
Secured cards typically work best for individuals with no credit or looking to rebuild bad credit. The cash deposit establishes collateral the credit card issuer may claim in the event of default or failure to make on-time payments.
What is a Secured Credit Card?
Secured credit cards work by having the cardholder front a required deposit to open an account, reducing the risk to the credit card issuer of you defaulting or missing a payment.
How Do Secured Credit Cards Work?
- Easy to get - No annual fee - Builds credit history - Can raise your credit score
Pros of Secured Credit Cards
- Requires a deposit - Secured cards don’t offer rewards - High fees and interest rates - Low credit limits
Cons of Secured Credit Cards