Selecting a Secured Credit Card

A secured credit card is a useful tool for building-or rebuilding-credit.  They are especially useful in building the habits that result from using a credit card wisely and paying it off at the end of every month.  When you decide to get a secured credit card, there are a number of criteria you can use to decide which card is right for you.

How much do you have to deposit?

The first and most obvious question when evaluating secured credit cards is to determine how much you must deposit into the secured account to get the access to credit.  Assuming that it is a one-to-one relationship, you will need to deposit the full amount of the proposed credit line.  Thus, in order to get the credit line, you will need to first save the money that you will need.

How much are you paying in interest?

The Annual Percentage Rate is the amount of interest that you will be paying on any balance that exists after the grace period.  Because the interest rates can be very high, between 9.9% and 25%, paying the balance in full each month is advisable.  Since the entire purpose of having a secured credit card is to build credit, paying the card off at the end of the month is the best practice.

How much is the annual fee?

If you pay your card off at the end of each month, this is the only cost to having a secured credit card.  So you should simply ask yourself how much you are willing to pay per year to improve your credit.  Fees can range dramatically from one card to the next, so shop around.  Also, consider whether there are other fees that may apply to you.