Secured Credit Cards - A Safe Way To Establish Credit

Secured credit cards are designed to assist people who have never had credit
or those who have bad credit, in order to enable them to establish a good
credit rating.

Typically, secured credit cards are issued when the holder is able to offer
a type of "security" deposit to the lender by depositing a pre-arranged
amount of money into a savings account, money market or certificate of
deposit. This is how it works: Usually, for a small fee, the lender will
allow the cardholder to utilize the credit card within the specified
parameters. Unlike using the cash for any purchases, the secured card
creates a credit history for the holder, thus contributing to their overall
credit rating.

With a secured credit card, it is imperative that you make full payments
each and every month; otherwise interest is charged on the outstanding
balance. If you default, the lender will use the amount in the security
account to pay off the debt and this can result in more damage to your
credit rating.

As with any other financial undertaking, it is important that you read the
fine print so you are totally aware of exactly what you are paying for.
There are some pretty unscrupulous predators out there whose primary goal is
separating you, the consumer, from your money. For this reason, you should
pay particular attention to the fee schedule prior to accepting any offers
for credit cards. Of course, no-fee credit cards are best, but most often
the lender will require a small one-time activation fee, which can typically
range from $25 to $30.

The onus is on the user to be vigilant when obtaining credit, so it is your
responsibility to make sure there are no hidden fees. Special care must be
taken when the contract contains clauses outlining registration charges
and/or set-up fees. In some cases, the cost of the card can quickly exceed
your credit limit, thus only adding to your credit woes.

With a secured credit card, you will of course pay a higher than average
interest rate, however, this does not mean that the interest charge is
outlandish. Many secured cards offer competitive rates under 19% and again,
this is where diligent research on the part of the user becomes paramount.
You should be cognizant of all grace periods, the penalty for late payments
and the fees charged should full payment not be made within the proscribed
time frame.

Once you show due diligence over the specified time frame (most lenders like
to see a history of six months to one year of responsible credit card use),
the creditor may offer to double the amount of credit available to you, with
a portion of this fixed amount being unsecured. Should you choose to close
out the account, however, the unsecured funds must be returned to the
lender.

The cardholder should ensure that the creditor regularly informs
credit-reporting agencies of their payment history.
Once it can be established that you are using credit reliably and sensibly,
your credit score will increase and you will then be eligible to apply for
an unsecured credit card.

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Liz Roberts is a loan consultant with NHBS Inc. offering helpful advice on
repairing bad credit. Visit our site
http://www.newhorizon.org/Info/securedcc.htm

to apply online for a secured
credit card