Secured credit cards are the kind of cards that are secured by your deposit account. You are the cardholder and you act like collateral if there is a defaulting case. Generally, you have to deposit money according to the credit line you desire. Some issuers ask for more money as a deposit. For example, let’s say you deposit $2000. They might give you a credit between $1000 and $2000. This amount will be saved in a special account as collateral.

You have to pay monthly bills- just like you would do with any other credit card. If you skip any payment, the card issuer can recover the amount from the collateral money.

Why secured credit cards?
When a credit card is issued against collateral, there is minimum risk for the bank, and in case the cardholder fails to pay his dues on time, the bank can recover them from the money deposited by the cardholder.

This would make sure that the cardholder will always pay his dues on time, because it is not basically credit from the bank, but rather his own money that he is spending. This feeling will ensure a higher degree of integrity in expense management.

Eligibility
Eligibility requirements are quite the same as applying for any other type of credit card. You need to come up with a few documents, like:

Identity and age proof
Income proof
Last 6 months or 1 years bank statements
Guarantors

Advantages of secured credit cards
There are many advantages of these cards, including the following;

Fewer risks
Since you deposit collateral when getting this card, the bank does not have as many risks when granting you this card.
Credit history
Your payment details are sent to the credit bureau, which helps you build a credit history. As you make regular payments, you will build up a good credit score.
Interest
There are some secured credit cards that let you build interest as you make purchases. Depending upon the interest rates, you can make a lot of savings, and can even earn a few dollars.

Disadvantages of secured credit cards
There are also some disadvantages of these cards.

Security deposit
You need to submit a certain amount of security money for the card to work. As stated earlier, for a deposit of $2000, you might get a credit of between $1000 and $2000.

There are some other minor disadvantages like not-so-competitive interest rates. When you apply for a secured credit card, keep these things in mind:

The amount that you would deposit
The legitimacy of the issuer
Credit limit for a given amount
Various types of fees
Payment grace period
Interest rates

Keep all the above points in mind and get the perfect secured credit card for yourself.

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