Does Getting a Secured Credit Card Improve Your Credit Score?

If you have troubled credit, or no credit at all, a secured credit card may be the quickest, safest way to improve your credit score. Just be careful of the high fees attached to some of these cards.

Secured Credit Cards

Some banks offer secured credit cards, which require you to open a savings account as collateral to "secure" the card. If you don't pay your bill, the bank can take the money in your savings account to cover the debt. A secured credit card can be a great way to build and improve credit, as long as the credit card company reports your account to one or more major credit bureaus.

Misconceptions

Don't confuse secured credit cards with prepaid credit cards. With a prepaid credit card, you "load" payments onto your card and can only spend that money. Many prepaid credit card companies do not report to the credit bureaus, offering you no benefit to your credit score.

Warning

Some secured credit cards charge very high fees, and some of these fees are ongoing. For example, you may be charged a set-up fee, a monthly fee, a yearly fee, and extra fees for making payments online or by phone. Shop around for a secured credit card with minimal fees.

References

• MSN Money: Bounce Back Fast After Bankruptcy
• Federal Trade Commission: Secured Credit Card Marketing Scams
• BankRate.com: 10 Questions Before Getting Secured Credit Cards