It’s not uncommon for people to find themselves with a bad credit rating, often as a result of credit card debt or filing for bankruptcy to seek debt relief. If you’re in this situation, consider applying for a secured credit card, which can be a powerful tool for rebuilding your credit. Here’s a brief guide explaining what they are and how they can help.

What Is a Secured Credit Card?

In order to receive a secured credit card, you’re required to put down a cash deposit to serve as your credit limit. This reduces the card issuer’s risk—if you don’t pay your monthly bill, the company will take that money from your deposit—so they can safely offer these cards to customers who have bad credit. At the same time, a secured credit card prevents you from falling into old habits and racking up credit card debt.

How Does a Secured Card Help Rebuild Credit?

The deposit you put down on a secured credit card will only be touched if you fail to make a payment on your bill. When you pay at least the minimum amount each month, the deposit is left alone and eventually returned to you in full. In the meantime, you can begin rebuilding your credit by using your card regularly, making payments each month, and spending wisely.

Secured vs. Unsecured Credit Cards

Once you put down your initial deposit, a secured credit card functions just like an unsecured card—you either pay off your balance in full each month or pay a minimum amount, carry a balance, and incur interest. Because a secured card poses less risk to the issuer, you don’t need good or even average credit to qualify for one—if you can put down a deposit, you can usually get one regardless of your credit rating. Unsecured cards, on the other hand, can be difficult to qualify for if you don’t have a good or excellent score.

There are some unsecured credit card companies that market themselves to people with poor credit and will issue you a card despite your bad rating. While it may be tempting to apply for one, beware—these cards typically charge very high interest fees and can quickly pull you right back into credit card debt.

For more information about credit card debt and the advantages of secured credit cards, contact the knowledgeable attorneys at Brian R. Cahn & Associates in Cartersville, GA. For more than 25 years, Brian Cahn been helping clients successfully seek debt relief and get their finances in order from five convenient locations in northwest Georgia. Visit the firm’s website to find the office closest to you and call (770) 382-8900 to speak with a helpful representative today.