What Is a Secured Card?

Secured cards are a good tool for repairing your credit.

Fotolia.com">credit card and hand image by Warren Millar from Fotolia.com

A secured card is a type of credit card. This type of credit card limits the amount of credit available to a savings account the bank holds as collateral. Students and people seeking to establish or rebuild their credit often open a secured credit card account.

Collateral

1. 
   Fotolia.com">rainy day savings image by Pix by Marti from Fotolia.com
   Secured cards are guaranteed by your savings.
   Banks that issue secure credit cards require you open a savings account with them. The amount required to secure the card can vary from several hundred to several thousand dollars. The cardholder can't use the savings account to make payments on the card account. It is held as security against the chance of cardholder default. According to the Federal Trade Commission, most banks pay interest on the savings account used to secure a credit card.

Interest Rate

2. Banks that issue secured credit cards generally charge higher interest rates than for unsecured cards. Look carefully at the application and disclosure documents to see exactly what interest rates you can be subject to pay.

Warning

3. Secured credit cards are a legitimate tool for credit access and repair but unscrupulous marketers and some lenders use deceptive marketing practices to attract victims for their scams. Be wary of offers guaranteeing credit, easy credit or any that ask you to call a 1- 900 telephone number.

Read more: What Is a Secured Card? | eHow.com http://www.ehow.com/facts_7383527_secured-card_.html#ixzz1E5LjpM4E