Secured credit card

Secured credit cards are the cards which require 100% or 200% of deposit of the credit amount required by the consumer in a savings account. Since this account is a savings account so it will also earn you some interest.

This deposit acts as a security. Secured cards are not a debit card so you will have to make the monthly payments in time. Missing out payments will cause extra fees and debt. The creditors can also deduct the money form the savings account if default is made. These provide a way to improve credit history resulting in better scores which helps in obtaining many better future interest rates and credit cards.

Secured credit cards are easy to obtain by the people who have bad credit scores then unsecured.

Unsecured credit cards

Unsecured credit cards are credit cards which give you a line of credit. You make a purchase and it is deducted form your limit. You have to repay the money back either entirely or in installments. In case if you let the amount revolve on to next months then an extra interest is charged form you.

Advantages of Secured credit cards

• There are many places where the only way of payment is credit card. If you are not eligible for unsecured cards, your scores too low or you have a bad credit history then a secured credit card can help make those transactions.
• A secured credit card can also make you to plan your spending as you may loose the security money in the savings account.
• For a starter it is a good way to make credit. If properly used a good credit can be established.
• In case a person's credit history is damanged and have a bad score then he can have a secured credit card to reestablish his score.

Watch out for the following at the time of applying for secured credit cards.

• When shop for secured credit cards you will get very high interest rates because you don't have good score or a history at all but should still not get an interest rate higher than 19%.
• Thoroughly read the terms and conditions other wise you might not know what fees or extra charges you will have to pay on late payments.
• Avoid any fraudulent opportunities for secured credit. Any call to 900 numbers mentioned in an ad costs you fees and you might not even get the credit promised. FTC warns you against such phone calls.