What is a secured credit card and how does it work?

Last Updated: May 24, 2013 08:44PM UTC

If you are newly establishing or rebuilding credit history after a negative financial event, a secured credit card can help you establish a credit history. Though the card will require you to put money into a deposit-style account to fund the credit line (usually anywhere from $200 to $500), many creditors pay interest on your money, typically at the same rate you’d make on a savings account. The amount of money you put forth is typically the amount of your credit line, though you may be able to make deposits into the account, to raise credit lines further.

As you prove your financial responsibility by staying under your credit line and making payments (ideally, pay the balance in full each month), and on time, you start to build a positive credit history.

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