Secured Credit Cards: How to Choose the Best Secured Credit Card

Choosing the best secured credit card for your situation is no simple task. There are literally hundreds of issuers offing secured credit cards. Before selecting a secured credit card you will need to remain mindful of the reason you are applying. Be sure to select the secured card that will best match your financial situation such as your income and your ability to repay.

A secure credit card works nearly the same way as an unsecured credit card. You are responsible for your line of credit and you make monthly payments on any balance you have acquired. Just like unsecured credit cards, your secured card may carry application fees, interest rates, finance charges, and annual fees in addition to any late fees and penalties you may incur. Your secured credit card will require you to deposit security funds into an account to be used as collateral for use of your card.

In most cases, secured credit cards carry higher interest rates and annual fees than unsecured credit cards. There are finance charges based upon a percentage of your current balance. As with unsecured credit cards, you'll want to choose a secured credit card with low interest rates, and low fees.

Most reputable secured credit card issuers will pay you interest on any security funds you have deposited. The interest rate you will earn on your security funds can range from 1 to 4 percent. You will want to consider the interest rate the issuer pays based on the amount of money you deposit. For example, if you deposit $100.00, the amount of interest the issuer pays may not be of great concern. If you deposit $1000.00 the interest rate the issuer pays may require careful consideration. Keep this in mind when making your choice.

One of the most important aspects to consider may be credit agency reporting. Does the secure credit card issuer you have selected report to a credit agency? You must remember the main reason for having a secured credit card is to establish or re-establish credit. Please select a secure credit card issuer that reports to the credit agencies. You want your account information to show up on your credit report as paid or paying as agreed each month. It is also important to select an issuer that does not report your account as secured.

When selecting a secured credit card it is important to be mindful of secured credit card scams. There are many unscrupulous individuals and companies that will take advantage of you and your financial situation. Some of the signs to watch for are 900 numbers and misleading information. Avoid the offers that read, "Bad Credit, No Credit, No Problem... Just call 900-555-5555." Chances are you will be charged unnecessary phone charges and could end up paying hundreds of dollars for useless information. You can also avoid being scammed by reading carefully. There are some companies that purposely leave out information about deposit amounts, application fees, and other processing fees so be sure to read the terms and conditions carefully when selecting a secured credit card.