When you find you have a poor credit history one way to build up a new and better credit record is to use a secured credit card, providing you use it correctly and don’t fall down while maintaining it properly. It could be your best way back to good credit.

They can be used just like standard credit cards, usually anywhere in the world that shows the usual ‘Visa®’ or ‘MasterCard®’ logos.

Secured credit cards are also called pre-paid credit cards. They work quite differently to standard credit cards, but function just like typical cards. Instead of using your card and you owing your bank the price of the goods you’ve bought plus interest, with these cards you’ve paid the bank in advance to get yourself a line of credit on your card. The amount you’ve paid the bank becomes secured on the card so you can use it up to the same level.

You won’t be able to spend beyond your limit, so you won’t need to worry about late fees or over limit fees, but you will have a new set of fees that might attract attention to your account.

Sometimes, but not always, the cards impose an annual membership fee. They might also charge you to process your application and then a card issuing fee. They might charge you every time you ‘load’ your card with money and a monthly maintenance fee just so you can keep a useful card in your wallet. Some will charge you a fee each time you use your card to buy something (with your money) and another for taking money from an ATM. Balance enquiries can cost you a fee and you’ll be charged for a new card if you lose yours. Overseas usage will add another percentage to your purchase price.

The good side is that if you don’t have a positive balance on your card, you won’t be able to use it and won’t go over your limit and feel charges hitting your account. This can help you avoid further debt and when the bank reports your usage to a credit reporting company, your credit status will be getting better each time your card is used perfectly.

Banks suggest that these cards can be good for younger people to start getting used to holding and using credit cards, without the downside of raising a high balance at short notice.

If you do get into problems with making payments, use a quality debt settlement company to help you manage your debt.

Pride counts as well. You can use these cards which look and feel just like a regular card. Your credit status won’t be shown up when you use these cards. These days many banks issue both standard cards and secured credit cards.

This entry was posted on Thursday, March 12th, 2009 at 12:25 am and is filed under Blog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.