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Angle Financial Services

Secured Credit Cards

Credit cards are a fact of life.
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You need one to make a hotel or plane reservation, or to rent a car, even if you plan to pay cash. Responsible use of a credit card builds a good credit rating, too, marking the owner as mortgage-worthy.

But people who have never had credit or need to repair a poor credit history may not qualify for a regular credit card. For them, a secured credit card may be the only way to establish, or re-establish, credit. 

Top 10 questions to ask about a secured card:

• What is a secured credit card?

A secured card requires a cash collateral deposit that becomes the credit line for that account. For example, if you put $300 in the account, you can charge up to $300. You may be able to add to the deposit to add more credit, or sometimes a bank will reward you for good payment and add to your credit line without requesting additional deposits.

 • Where can I get a secured credit card?

If you're a credit union member, ask about a secured card there. Many credit unions offer secured cards to their members and may offer lower interest rates and waive annual fees. Also CLICK HERE or HERE.

 • What kind of charges will there be?

This is where it pays to shop around. Look for a card that doesn't charge an application fee. Most secured cards charge an annual fee, and they vary dramatically. Read the fine print. Some people have gotten secured cards and found their entire limit consumed with fees before they ever used the card.

 • How much money do I have to deposit?

Most allow minimum deposits of $300 or $500. Your credit limit will either be the amount of your deposit or some percentage above that amount.

 • Do all banks offer secured credit cards?

NO. LOOK HERE for options.

• Are there any problems to watch out for?

Yes. Howard Dvorkin, chairman of Debt.com, calls secured credit cards "a Clint Eastwood movie -- the good, the bad and the ugly. Some are good. They have low fees and treat customers as customers instead of as cattle. The bad ones take advantage and extort the clients because of their situations. Then there's the ugly, which are completely despicable. They'll give you the card, but you have to buy this insurance policy for $55 a month."

 • Does the issuer report to all three major credit bureaus?

The reason for having a secured card goes far beyond being able to buy things online. It's a vehicle for building a good credit history. If the issuer doesn't report, you've lost a major benefit. (Tip: If you start getting mailers offering you unsecured cards after you've made several months of payments on time, you'll know that the bank is reporting

 • How long does it take to qualify for an unsecured card?

The card issuer should want to keep you as a customer, so most will qualify you for an unsecured card after a period of making all your payments on time. The average is about a year.

* Will your deposit earn interest?

MOST Do not.

 • How can I make the best use of a secured card to build my credit rating?

Buy a few things and pay off the card every month. Keep your utilization below 30% to maximize your credit scores.
Secured cards have annual fees and higher interest rates than regular, unsecured cards. If you have enough discipline to use a secured card responsibly, you have enough to use an unsecured card and set up a better savings program on your own.

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