Many people are in the unfortunate situation where they have bad credit but they need to have a credit card. The reasons vary, but they're mostly related to being able to pay for stuff. For example, there's no need to stress the fact that if you're out shopping for what you need, it's so much safer to be able to use a credit card than to carry around a wad of cash. It's also more convenient that writing a check.
Furthermore, paying with a credit card provides you with a record of your purchases, which can come in handy when you're trying to keep your spending under control. Finally, credit cards can help you build your credit. So when you look at it, it's not ALL bad when it comes to credit cards. You simply have to use them carefully. That's where a secured credit card can help you get the best of both worlds.
In case you're wondering, a secured credit card works just like any other "normal" credit card out there, and also looks the same; it can bear the Visa, MasterCard, American Express, or Discover logo. So there's no concern over people knowing that you're using a secured credit card, if that's something you'd care about. The major difference with a secured credit card comes into play when you're about to get it. Here's how it works.
You have to open a savings account for a certain amount of money, and then that money will be frozen on that account, meaning that you will not be able to withdraw it. The reason is that this money will be used by the card issuer as collateral for the credit card they're going to issue you. In essence, you deposit that money and allow them to take it if you fail to make your payments.
In most cases, the money that you deposit as a collateral will generate interest, just as any other savings account. Furthermore, many secured card issuers will reconsider your case after a certain amount of time, usually a year. At that time, if your account shows a track record of timely payments and no exceeding of your limit, your account may be upgraded to unsecured status, which means that your credit card will no longer be tied to your deposit, and said deposit will be available for you to use.
A secured credit card also allows you to exercise control of your credit: you can increase or decrease your limit according to your needs. You can choose to make the minimum payment or bigger payments, knowing that no matter what, you can pay off the balance when you choose to. Plus, should something come up and you decide you're better off with no debt at all, you can apply your collateral and then if there's any balance, you can use that at your discretion.
One of the important things to keep in mind is that you will have to pay fees in one way or another. A little online comparison shopping will go a long way towards helping you finding deals that are competitive. Online issuers often offer perks, in a bid to get more customers.
Finally, do make sure that you get a secured credit card, and not a prepaid credit card. The difference is that issuers of prepaid credit cards don't report to the credit bureaus, and since what you're trying to do is improve your credit, they would be of no help in that particular situation.
