How Does a Secured Credit Card Work?

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A secured credit card is a prepaid credit card that is issued to someone who is unable to use traditional credit cards because of a poor credit history. Discover how prepaid credit cards can be used to improve someone's ratings with help from a registered financial consultant in this free video on credit and personal finance.

Part of the Video Series: Credit & Personal Finance
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Video Transcript

This is financial adviser, Patrick Munro talking about how does a secured credit card work? Many times individuals run into credit challenges whereby they can no longer have traditional credit cards and as a result they put up cash to a special credit card vendor, their own cash and then they are given a credit card number that works identical and looks identical to a traditional credit card. However, when they are using the money and the credit card for their charges of payment of goods and services they are actually spending down their own money. These companies charge a higher rate of interest than a traditional credit card because of the fact that the individual has had some past credit experiences that were negative. However, if you use a prepaid credit card in a positive away and pay in a timely basis the individual credit card company will end up putting in their own money and lowering the interest rate going forward. It is a great way to rebuild credit and this is Patrick Munro talking about the benefits and usage of prepaid credit cards.

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