Tips on How to Use Secured Credit Cards Wisely

One of the best cards you can get to build or rebuild bad credit is a secured credit card. By managing this card properly, you can have the chance to regain your credit worthiness and build an excellent credit rating.

But what is a secured credit card? Why is it is used so often to build or rebuild credit? And how can you use it to improve your credit score?

What are Secured Credit Cards?

Secured credit cards are credit cards that require an initial deposit that is immediately put into a savings account.  The amount that you deposit becomes your line of credit.

*hint* when shopping for a secured credit card, read the fine print. Close-Up Of Credit Cards Some companies will give you MORE than what your initial deposit is!  I’ve seen some give as much as 150%!  are special types of credit cards issued by banks, credit unions and other financial institutions in which your credit score isn’t the #1 requirement for approval. That is because it requires an initial security deposit that Before you can use this card to pay for your purchases and even bills, you have to come up with an initial deposit first. The initial cash-out actually serves two important functions. First, it acts as the collateral for the use of the credit card. Should the cardholder default on his secured credit card payments, the lender can tap on the initial deposit to settle the unpaid charges. Second, the initial deposit acts as the credit limit for the card. Thus, a cardholder can only spend as much as he deposited on his credit card.

How a Secured Credit Card Works

As was mentioned above, a secured credit card functions just like any other credit card. You can use it wherever credit cards are accepted to buy products and to pay for services.

Still, secured credit cards are unique. This is because they are usually offered to people with bad credit history or no credit at all. Issuers of these cards do not normally require applicants to have good credit rating. Instead, they just require applicants to submit identification documents and fill out application forms. Also, applicants need to pay application fees, processing fees and annual fees for them to get approved for this card.

Because they are usually offered to people with bad credit history, secured credit cards are also called bad credit credit cards.  Now how can you use a bad credit credit card in a proper way? Let us find out how.

Tips on Using a Secured Credit Card Properly

1.    Keep your charges minimal. Your main purpose in getting a credit card for bad credit is to build positive credit history. So avoid using it on large purchases. Instead make use of your secured credit card in making small purchases that you can pay off right away.

2.    Employ good credit habits. Remember to pay all your charges in full and on-time every month. This will not just help you avoid debt build-up. Doing this will also help you improve your credit history. By managing your credit card properly, you can be assured of regaining credit worthiness.

3.    Use your card to qualify for unsecured credit cards. People usually take secured credit cards to get approved for unsecured credit cards in the future. This is because lenders usually look at how you managed your credit card for bad credit as basis for being eligible for unsecured credit card programs. If you pay your credit charges on time for a whole year or two, lenders will see you as a qualified holder of an unsecured credit card.

About the Author

Tara Tiemann is a credit analyst for which has been a resource site for people who want to live debt free. If you are on a budget using prepaid debit cards,prepaid credit cards and prepaid cell phone service can save you big money!

About Liz Roberts

Liz Roberts is the new credit specialist for Go-Prepaid. If you are on a budget, we can get you discounted cell phone service from Sprint, Verizon and T-Mobile! NO CREDIT CHECK ! Using a prepaid services can save you a TON of money! Follow our blog to find out how!

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