secured credit card is offered to an applicant who may not be approved for an unsecured credit card, by the credit card company. A secured credit card is a form of credit that requires you to back your credit line with a cash deposit. For example, if you transfer $500.00 to a secured credit card from your bank account, the credit card company will extend you that much credit on the credit card. Many banks will pay interest on he money deposited to guarantee the credit line.

Typically the bank will hold that deposit for a period of a year, afterward some banks convert your secured credit card to an unsecured credit card and they refund the money originally deposited to guarantee the credit line. Not all secured credit cards are made equally, some will report to the credit bureau as an unsecured credit card “very desirable” while others will report as a secured credit card. As with an unsecured credit card there are fees that the credit card company imposes for the use of the credit card, this fees vary from one card to another.

Secured credit cards that report to the credit bureaus as an unsecured card, are great for consumers that have slow credit or very little credit history or even consumers post bankruptcy. Secured credit cards will assist you to establish your credit as long as you use the credit card responsibly, do not go over your credit limit or charge more than 30 percent of your available credit line.

An unsecured credit card is totally different. An unsecured credit card is a revolving line of credit that is not secured by money and it is granted based on you promise to repay charges made by you. Most credit card companies issues unsecured credit cards to individuals, based on their Fico Score. A higher Fico score will allow you to obtain credit cards with better terms “higher credit lines, lower interest rates”. Each credit card company is different and the Fico score is not the only tool they use to determine your credit worthiness. Meaning if you have good credit already, and you apply for a unsecured credit card with a credit limit of $1,000.00, then the credit card company will allow you to use the credit card with the amount issued.

Not all credit card companies offer both types of credit cards. However there are plenty of credit card companies that will offer one or the other.

Both credit cards require you to make monthly payments and you access fees if your payment is late or you go over your credit linen. If you obtain either card, make certain that you understnad the terms of your credit card agreement.

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Tags: Credit Cards, secured credit cards, unsecured credit cards, why secured card

This entry was posted on Wednesday, February 25th, 2009 at 6:50 am and is filed under Credit Cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.