Ask Money

Secured credit cards

Chris Farrell Oct 24, 2011

Question: Hello, I was just listening to your program here in sunny San Diego, Saturday around noon (Oct 22). You were interviewing a recent college graduate out of Alaska. At the end of the program he mentioned getting a secured credit card. Is getting a secured credit card a good way of building credit? I am in a situation similar to the guy you interviewed, whenever I apply for a credit card I’m denied, but I have been thinking about getting a secured card. By the way, I’m a long time listener and I have to say, besides having great reporting on financial issues, you all have some off the most kick ass background music, keep up the good work. Leo, San Diego, CA

Answer: A “secured” credit card is a good–and often the only–option for many people to rebuild their credit. (And the music is good, too. Thanks.)

To review the basics, with a secured credit card you open up a special savings account with a bank or credit union. Your credit limit is equal to or little less than the amount on deposit. You’ll earn a something off the security deposit, but not much in normal interest rate environments and close to nothing with today’s fractional rates.

It pays to shop around since the minimum requirements and terms for secured credit cards differ among financial institutions. The secured credit card also come with higher fees than regular credit cards. However, after paying off bills on-time and over-time you should be able to switch to a traditional lower-fee unsecured credit card.

About two-thirds of banks offer secured credit cards. recently came out with its latest report on the secured credit card industry. It compares terms among the biggest issuers here. also offers information on the rates and terms of secured credit card lenders.

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