If you’re wondering what is a secured credit card, you’ve come to the right place. A secured credit card allows you to make purchases on a revolving line of credit while you’re putting up a security deposit. This deposit acts as a safety net for the bank, and it covers purchases if you don’t make payments on time. As with a traditional card, paying your balance on time is essential. In some cases, the bank may retain the deposit if you default.
Using a secured credit card to rebuild your credit is a smart idea. While secured credit cards are not subject to the same high credit scoring requirements as unsecured cards, they can help you repair your score. As long as you can keep your balance below 30% of your credit limit, you won’t have to worry about your credit score going down. And you can expect to get your deposit back when you close your account.
If you want to graduate from a secured credit card, you can opt for an unsecured one. The issuer may offer to convert your account to an unsecured one in exchange for your security deposit. If you don’t want to return your security deposit, you should keep the account open. This is good for your credit score, so it’s worth it to keep it open for a while. If you decide to graduate from a secured card, remember to shop around for a better one.