How do Secured Credit Cards Work?

For many who are young (16-21 years old), getting credit is almost impossible. The reason is that they haven’t yet established a long credit history. So a car loan company or mortgage company will be wary to loan someone tens of thousands of dollars when they have yet to prove their creditworthiness (I can’t believe that’s a word). So the task is to build up your credit. One great way of doing that is with secured credit cards.

Here is how secured credit cards work. You deposit funds into your credit card account. That amount you have is your credit line. You can then use whatever balance you have to make purchases. There is little risk for the credit card company, since they’re not loaning you any money. These cards are extremely easy to get approved for and are great for a young person to build up their credit. Not only that, but you can even earn a little bit in interest from your balance every month.

About The Author

Edwin is a marketer, social media influencer and head writer here at Daily Finance Options. He manages a large network of high quality finance blogs and social media accounts. You can connect with him via email here.

2 Comments

  1. Eric Humphries

    These cards are good for building your credit. I’ve used them in the past and it works. Takes some time, but it works.

    Reply
  2. Warford Designs

    I find the secure credit card is like a credit card with training wheels for the younger generation.

    Reply

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