Secured Credit Cards vs. Unsecured Credit Cards

When choosing a credit card, it helps to understand the difference between secured credit cards and unsecured credit cards.

These credit cards are treated differently by the major credit bureaus, and they affect your wallet differently as well.

Secured Credit Cards

These are credit cards that require you to hold money, as collateral, in an account in order to use the card.

A secured credit card requires that you have some sort of “security” indicating that you will repay the loan.  You are charged interest and fees on your purchases, and your payments are reported to at least one credit bureau.

However, the fact that the card is secured means that it isn’t as positive for your credit score.

A secured credit card is normally ideal for those who are trying to rebuild their credit.

If you have had credit problems in the past, you might not be able to get a loan without collateral — and this includes a credit card.  A secured credit card will allow you to begin rebuilding your credit and showing that you are ready to adopt responsible behaviors.

It is important that you understand the difference between a secured credit card and a prepaid debit card.
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