Secured Credit Cards are designed to give you credit without the bank taking on risk. People who have no credit or have claimed bankruptcy and need to rebuild their credit, usually apply for this type of card.

Traditional credit cards provide you with “credit” from the bank. If they give you a credit card with a $5,000 line of credit, they will essentially loan you up to $5,000.

With a secured credit card the bank takes on no risk. You deposit money at the bank, let’s say $200, and the bank gives you a $200 credit limit on your credit card. Once you establish credit and qualify for a non-secured card, you can close your account at the bank and get your money back. If you don’t pay your monthly bills, the bank has your money as collateral.

Secured cards can be tricky and you need to do your homework before applying for them. Scams are common so stick to a reputable bank. Some of them treat you fairly, but some of them will hit you with insane fees like: an annual fee, registration fee, application fee. You could end up paying over $200 in fees before you even make your first charge!

You can search for a new secured credit card here.