They say that only a secured credit card is the answer to the problem of those who have never had credit or those whose credit history is bad. However, what is a secured credit card? You need a cash collateral deposit which will act as your credit line. Your limit could also be some percentage on top of that amount. You can charge up to the amount of your collateral, plus you have an option to add more credit. The collateral deposit vary; most of the time, banks require $300 to $500 deposit. Sometimes, if you are always updated with payments, banks will award you with additional credit line without having to deposit more collateral. Other companies do not charge an application fee, so make sure you shop around first for options before deciding to sign-up with one. Shopping around also helps when comparing the annual fees because some companies have astronomical fees that you are already burdened with even before you are able to use it.

A secured credit card is not offered by all banks. There is a trend that banks are veering towards unsecured cards with lesser limits, but higher interests and fees. Financial experts say, however, that going secured is still the best and sometimes the only option for those who are just starting out. It is also not offered for those trying to rebuild credit that once blew it by mismanaging accounts.

As already mentioned, a secured credit card will help build a good credit history. If the bank where you availed this does not report it to major credit bureaus, the purpose is clearly defeated. You will know if an issuer reports you if all of a sudden, after having been faithful in paying secured card balances, you get offers in the mail for unsecured cards. If you have been paying dues on time, most likely, banks will qualify you for an unsecured card, most likely after about a year.

Your collateral will also earn interest the same way as when you open a savings account. It must be clear, though, if you have to keep that amount for a certain period of time after your card account has been closed. Some banks require that you keep a deposit in the account until all further charges are cleared.

Lastly, it will help if you use the card frequently and pay off all balances every month to show that you are responsible to handle credit. Since most cards of these types have higher interest rates than a regular card, it is not advisable to keep one for too long.

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