Secured Mastercard: The Lowdown

A secured MasterCard is a type of card offered by many providers. These cards primarily target people that do not have the best credit history, and are looking for a way to re-build their score, whilst at the same time have many of the benefits that a credit card can bring.

Just some of the many companies that offer these types of cards to consumers include Orchard Bank, First bank of Delaware, Continental Finance, and practically every other provider on the planet.

The major difference is that the customer is required to make an initial deposit of their own money, which then becomes their limit. This is opposed to an unsecured card, where the cardholder is extended a line of credit from the card operator.

The actual amount deposited can vary from card to card, but typically has to be at least $200. This deposit is held by the company, and acts as insurance against the user defaulting payments and becoming a bad debt. If the account is managed as agreed the deposit is returned when the user closes the account.

Perhaps the major benefit is that they usually offer reporting to some or all of the three major card bureaus. This means that if the cardholder uses their secured MasterCard in a responsible and appropriate manner they may see an increase in their score and become eligible for better value financial products in the future.

The downside is that they usually come with annual fees, and sometimes monthly fees as well. The annual fee can range from around $19 to above $150, depending on exactly which card a consumer opts for.

The annual percentage rate of inertest (APR) can also vary wildly. Some carry an attractive APR of around 12%, whilst others charge 24.9% and above for purchases. As a result, it really pays to shop around for the best deal before making an application.

The card itself offers much the same benefits of an unsecured card. It can be used to pay for items at anywhere that accepts MasterCard, withdraw cash from an ATM, and as security for transactions such as renting a hire card.

A secured MasterCard is highly recommended for any individual that has struggled with money management in the past, and would like to start from scratch and re-build their rating. It is also a good option for a younger person that has no previous history.

Those with a better history should first consider an unsecured card, which offers all of the same benefits but does not require an initial deposit.