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Secured credit cards are a type of credit card that is secured by a deposit made by the cardholder into a special account held by the card issuer. Usually, the cardholder must deposit between 100-200 percent of the total amount of credit desired (on the card.) In other words, if the cardholder deposits $1,000, they will be given credit in the range of $1,000-$2,000. Sometimes the issuer of the card will offer incentives, in which the deposit required may be significantly less than the required credit limit. Sometimes with these types of incentives, the deposit may be as little as 10 percent of the desired credit limit. Sometimes, a homeowner’s equity in their home may be used to secure a credit card. The deposit made for the card is held in a special savings account. Other than the required deposit, secured credit cards work the same as any other credit card. The cardholder of a secured credit card is expected to make regular payments on the balance of credit used. Secured credit cards are an option for people who have no credit history or a poor credit history. They are often used as a way to rebuild one’s credit (for instance after going through bankruptcy. Fees and service charges on secured credit cards are often higher than those on unsecured credit cards. All of these conditions and requirements should be described in the cardholder agreement the cardholder will receive when their card is opened.

 


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