Credit Card Study

What are Credit Cards
Advantages of Credit Cards
Applying for a Credit Card
Children and Credit Cards
Credit Card Terms and Fees
Credit Cards - The Right Tool for Merchants
Credit Cards as a Credit Instrument
Credit Cards Codes and Numbers
How Many Credit Cards are Enough
How to Select the Right Credit Card
Interest Rates for Credit Cards
Online Credit Card Usage
Risks of Credit Cards
Using Credit Card Overseas
Where to Use a Credit Card
Zero Rate Credit Card or Not

Major Credit Card Issuers
Wamu credit cards
American Express Credit Cards
Capital One Credit Cards
Chase Credit Cards
Citi Credit Cards
Diners Club Credit Cards
Discover Credit Cards
Mastercard Credit Cards
Visa Credit Cards

Credit Cards and Debt
Avoiding Credit Card Debt
Bad Credit and Credit Cards
Credit card debt consolidation
Credit Card After Bankruptcy
Credit Cards and Credit History
Getting Out of Credit Card Debt
Filing For Bankruptcy
If a Credit Card Issuer Sues You
The Optimal Credit Card Balance
Credit Card Debt Refinance

Credit Cards and Fraud
Avoiding Credit Card Fraud
Credit Card Fraud Protection for Merchants
Famous Credit Card Frauds
Famous Credit Card Law Suits
How Credit Card Issuers Cheat
Merchant Credit Card Fraud
Protect Your Card
What to Do in Case of Identity Theft
How Consumers Cheat

Types of Credit Cards
Business Credit Cards
Debit Cards vs. Credit Cards
Low Interest Credit Cards
Rewards Credit Cards
Secured Credit Cards
Student Credit Cards
Types of Credit Cards
Unsecured Credit Cards
Zero Credit Cards

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Secured Credit Cards

Secured credit cards are issued to people who either have no credit history at all or their credit history is bad and because of that they can't obtain any other type of credit. Although secured credit cards have many of the benefits of unsecured ones, like being widely accepted in shops, restaurants, hotels, etc., they have one major difference – you are actually spending your own money, not money the issuer has lent you. Secured cards are also called prepaid cards because you cover all your purchases upfront.

In that aspect secured credit cards resemble debit cards but in fact both are fundamentally different. Many merchants accept payment via credit cards only , which means that in this case you will be able to use a secured credit card but not a debit one. So, although secured credit cards are issued to you only after you deposit money in your account, they are still a credit card, not a debit one.

In some cases issuers require a co-lateral for issuing a secured credit card but generally a deposit with the issuer is also OK. It varies from one issuer to the other but generally the interest rates on secured credit cards are much higher than on unsecured and also the credit limits are lower. Most often the credit limit matches the amount of money you have deposited but it is possible to find offers that are more liberal. Sometimes one issuer has more than one type of secured credit cards and the differentiators are the credit limit and the interest rate. More favorable conditions – i.e. a lower interest rate and a higher credit limit – are offered to clients with no credit history and the really tough conditions are offered to people with bad credit history.

Besides the higher interest rate and the lower credit limits, usually there are other unfavorable conditions as well, like high fees (for approval, per transaction, late fees, etc.) and higher monthly limits. Issuers do this in order to protect their investment but sometimes the fees are so outrageously high that one starts to think if they are not taking advantage of your poor financial state.

So, with all that said, why should one get a secured credit card if it is that bad? Well, actually the people who get a secured credit cards do not have the choice, so most often they simply accept what they are offered. But even if you are not in a position to negotiate the terms, accepting the first card that you are offered is hardly a good idea. Even if you have no choice but a secured credit card, there are still plenty of offers to choose them and it will be stupid to accept the least favorable one.

Sometimes it is much better to reject an offer for a secured credit card, if its fees and charges are outrageous because chances are that such a credit card will not help you build a positive history, but on the contrary, will bury you deeper in bad credit. Also, before you apply for a secured credit card, make sure that the issuer reports it to a credit bureau because if they don't report it, all your efforts will be in vain.

Finally, when you are applying for a secured credit card, ask the issuer about the possibilities of converting it later to unsecured. Many issuers offer such options, so it is best that you know in advance if you can do it or not. Even if the issuer does not offer such options, you can always close your card when you get enough positive history and are able to obtain an unsecured one but still it is better if you can simply convert one type of credit card into another.