Getting a secured credit card might sound repugnant to you...especially if you've been dreaming of a regular credit card with thousands of dollars in allowed credit to shop at all your favorite stores!  But don't shrug your shoulders at a secured card just yet.  Learn how a secured credit card can help boost your credit score and build an amazing credit report that will attract lenders and very good interest rates!

Why a Secured Credit Card?

There are two reasons you may need a secured card.  One, if you have very little credit or no revolving credit (i.e. current credit cards) on your credit history, a secured credit card can help you build credit and increase your credit score.  Although getting a regular credit card seems easy for most, you might not get approved for one unless you already have a very high credit score or other revolving credit.  If you lack credit, most card issuing banks will want you to establish trust with a secured card first.

The second reason you might need a secured credit card is if you have filed bankruptcy or have had a foreclosure or repossession in recent years. These can be detrimental to your credit score for many years, but a secured credit card can help you rebuild your credit more quickly.

If you are unable to get a regular credit card for either of these reasons, a secured card will come in handy if you ever need to secure a hotel room, rent a car, make plane reservations, buy online tickets, pay for a vehicle or medical emergency, etc.

How Does a Secured Card Work?

The card issuer will require a collateral deposit from you, generally $200 to $500.  This will be placed in your account and used as your actual credit limit.  In other words, you can only spend the amount of your deposit and no more.  Some banks will reward you with the ability to increase your limit if you pay your balances back in full and on time every month.

How to Get a Secured Card

You can obtain a secured credit card through a local bank, credit union or online venue, but be sure to read all the fine print before applying.  Some charge high fees up front or high annual fees.  A good place to compare online is Bankrate.com, a site that lists a number of sources offering secured cards.   You'll also want to be sure the issuer will report your good payment efforts to the three major credit bureaus regularly.  These are Equifax, TransUnion and Experian.  If it doesn't state this information in the terms of service, then call and ask to be on the safe side.  Although the card is secured, it may be reported to credit bureaus like a regular credit card.  This means it will show on your credit report as revolving credit and may boost your credit score as such.

Tips on Secured Card Payments

Once you get a secured credit card, don't max it out on large purchases.  Instead you should make small, regular purchases month by month and always pay your balance in full by the end of each statement period.  Using the card on smaller purchases and paying the balance regularly is what will ultimately help increase your credit score.  Avoid carrying a balance in any given month....this may actually hurt your score.  Remember, you're using the secured card to build a good reputation with lenders and credit bureaus.

Use a Secured Card as a Stepping Stone

A secured card can be used as a stepping stone to obtain a regular credit card in the near future.  Some secured card issuers will change it over to a regular card within two years should you choose to stay with that particular bank.  This means you can begin using your card without keeping a money deposit to secure it and you'll still reap the benefits of a better credit score.

A secured credit card in itself cannot solve all your credit problems; however, it can be used as a major tool in helping you reach your long-term financial goals.  Having a good credit score can help you get a car loan or home loan with low interest rates, better car insurance rates and even establish credibility in your community.  Check out resources today to find a secured card that's right for you!