In the age of reduced credit and more weary consumers, the notion of a secured credit card has become more common. Secured credit cards can be a vital tool for those who have just started to build credit or may otherwise not qualify for an unsecured credit card, but many rumors and myths surround their existence. In the past, very few had to rely upon this type of credit due to the ample availability of unsecured lines of credit. This in turn helped fuel the effects of the recession that many have experienced over the past several years. If you or someone you know is considering a secured credit card but are unsure of its purpose, then continue reading to find out about the most common myths associated with them.

They’re for People with Bad Credit

Since a secured credit card requires a deposit that functions as your credit limit, many people consider these cards to be for those with poor credit. This could not be further from the truth. In many cases, secured credit cards are used as a way for people with no credit (which is not the same thing as bad credit) to build a reputation of consistent payment history that will be reported to credit bureaus. It can also be a great way for those who want to remain financially independent to enjoy a line of credit that will not spiral out of control over time – if you hit your limit, no more spending.

Secured Credit Cards

There Are No Monthly Payments

This is another myth about secured cards – some people believe that the deposits mean that there are no monthly payments to be made. The deposit is held as collateral and is not immediately used to cover your purchases; it is only used if you fail to pay off your accrued debts. Users of secured credit cards will have monthly statements and will face interest charges just like any other consumer if they carry a balance from one month to the next. There is a minimum amount that will be due each month, which makes it even more similar to an unsecured credit card than many believe.

They Stigmatize Your Ability to Obtain Unsecured Credit

For whatever reason, this has become another common myth associated with secured credit card usage. In regards to how creditors and credit bureaus view your activity, there is no difference between a secured or unsecured line of credit. Assuming that you pay your bills on time, a secured credit card can boost your chances of obtaining an unsecured line of credit in the future. The only difference between the two is the deposit that is required for a secured card.


A secured line of credit can be perfect for young adults, those with no credit or those with poor credit. Since you pay up front the total amount of your credit line, you will be far less likely to wind up in a situation where you owe more than you can afford, and this will only happen if interest charges are allowed to accumulate.

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