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Secured Credit Card Tips

 What is a Secured Credit Card?

A secured credit card is a type of credit card that requires a cash deposit to be made when you open the account. The deposit acts as collateral for the account, and the amount of the deposit is usually equal to the card's credit limit.  

Secured credit cards are reported to the three major credit bureaus, so making payments on time will help improve credit scores over time.

Using a Secured Credit Card

For most people a Secured Credit Card is used to start their credit journey or to start rebuilding their credit after a significant Credit problem.

Paying your Secured Credit Card

You must pay your Secured Credit Card bill on time.  Even though you made a $500 or $1,000 deposit to get your Card you must pay your regular bill on time.  

Remember you will be rated by the Secured Credit Card Issuer on whether or not you make your payments within the allowed payment time.

When to Pay your Credit Card

Normally you will have twenty one to thirty day grace period to pay your bill from the Billing Date of the statement.  

The end of your grace period is the payment date and it will be clearly stated in your statement.

If you mail your payment be sure to mail it a week before the due date to make sure it gets to the bank on time.

I never recommend carrying a balance on your credit card.  The interest charges are usually huge and it is really easy if you do not pay off your card for the balance to just keep growing.  

Interest on a Secured Credit Card

Let's say you have put in a deposit of $500.  You received your Secured Credit card with a $500 limit.  This month you charged $300 and made an on time $100 payment leaving a $200 balance.

You will be charged interest on the $200 balance.  Using the card is good for your credit however leaving an unpaid balance does not improve your credit score.   I recommend using your card which will keep it active but paying it off in full every month.  

Secured Credit Card Conversion

After six months to a year of on time payments and if nothing else has gone astray in your credit history the bank issuing your Secured Card may be converted to a regular credit card.  At this time your $500 deposit will be returned to you.

Tracking Your Credit Card

I strongly recommend setting up a log in to your credit card account and logging into your account regularly.  That way if there is an issue you can easily track all your transactions and returns.

Check out my article on The Credit Trap.  

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