Secured credit cards are great tools for people who want to build or rebuild their credit. Rather than using your credit score to determine how much you can borrow, secured credit cards are backed by your own money. However, unlike a prepaid debit card, they can still be used to build credit and earn other benefits normally associated with credit cards. Here are some of the main benefits of secured credit cards:
- Build credit with lowered risk of debt. Since secured credit cards are backed by your own money, they allow you to build credit without the risk of getting yourself into major credit card debt.
- Have flexible spending power. Secured credit cards can be used exactly like a credit card, which gives you a lot of flexibility in how you choose to spend your money.
- Often have a higher approval rate. Because secured credit cards are backed by your money, they carry lower risk. This creates a higher approval rate, even for borrowers with low or damaged credit scores. In fact, at People’s, all members get the same rate regardless of credit score.
How Do Secured Credit Cards Work?
On the surface, secured credit cards may sound a lot like a prepaid debit card. So how exactly do they work, and what allows them to function as a credit card if they are backed by your money?
Secured credit cards work by requiring an initial security deposit, and then granting you a credit limit if approved. Instead of your money immediately going onto the card like with a prepaid debit card, it prevents you from getting into debt.
Once fully approved, the secured card can then be used to pay for things exactly like a regular credit card. The user will still need to make monthly payments to cover the balance, which is how these cards are able to build credit. Most security deposits are also refundable once the user decides to close the account.
If you are looking for a safe and easy way to build credit, a secured credit card could be a great option. And, getting started is easy with People’s Community Credit Union! With five convenient branches throughout the Vancouver WA area, we can help you get started. Learn more about our Secured Visa® Credit Card or contact us with any questions.
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What Are Secured Credit Cards? in Vancouver WA
Serving Greater Vancouver WA