Secured credit cards are great for those without credit or those with bad credit because they help build back credit ratings. A secured credit card is a card where a deposited is made to secure the card. This deposit can be made to a bank account or certificate of deposit.
Since you will have money holding, some institutions apply interest to your deposit thereby allowing you to earn while you spend. This interest is normally small, but is a good tool to use when comparing secured credit cards.
Outstanding balances on secured credit cards are still subject to interest, so in comparing cards it is necessary to know what the APR is. If the APR is high, carrying a balance or making just minimum payment will cost more in the long run.
Like other credit cards, the fees charged to the secured credit cards play a role when deciding on the best card for you. Look out for cards with high charges as this will reduce the amount of your deposit significantly. Additionally there are some cards with hidden charges, so be sure to read agreements carefully and ask questions. Remember when looking around that not all secured credit cards charge an application fee; if re-establishing credit is your aim this should be important as it will leave you with more money to deposit.
Do you need to buy insurance to use the card? If yes, look around for a secured card that does not have this option if increasing your spending limit is your aim.
Generally the credit limit of secured credit cards is dictated by the amount of your deposit, however, some banks only give a percentage of the deposit as the available credit. Therefore the way in which your credit limit is arrived will factor significantly in any decision on the best card for you.
If using a secure card to re-establish credit or to build credit, ensure that the issuing company report to the credit agencies.
To compare
secured credit cards, Eric Wasselman recommends Find Credit Cards.
