A secured credit card requires you to make a deposit that then becomes your available credit line. It’s a convenient and valuable tool for people who have no credit built up or are trying to rebuild their score following a bankruptcy filing. If this applies to you, find out how you can use this type of card to boost your rating.

How Secured Credit Cards Work

A traditional credit card gives you a line of credit without requiring you to put cash down. Unsecured cards pose more risk to the issuer since they don’t have any collateral from you if you don’t pay your balance. If you have bad credit, you may find it difficult to get approved for such a card, and those companies that do approve you may charge high interest rates and fees to counteract the risk. 

A secured card is similar to a prepaid credit card or debit card in that you must demonstrate that you have funds first. However, when you make purchases with your secured card, the initial deposit you made isn't affected. The company will only dip into this security resource if you fail to pay off your balance. This is different from a debit or prepaid card, where your purchase is immediately subtracted from your balance. 

How They Build Credit After Bankruptcy

Bankruptcy will affect your credit score. If you have trouble getting approved for an unsecured card after a filing, opt for a secured card. You must first apply, providing basic financial information and agreeing to a credit check. Once you’re approved and have made your deposit, you’ll receive a card that looks just like any other.

Use the card regularly and pay off the balance in full every month, which will be simple due to the low credit limit. This will help you avoid interest fees and keep your credit score rising. Gradually, your score will build to a point where you can graduate to a traditional credit card.

If you’re considering bankruptcy, consult Pearce Law Firm of Foley, AL. These attorneys know how stressful money troubles can be and are dedicated to helping their clients regain their financial footing. They’ll guide you through the process from start to finish, providing a hassle-free experience. Visit the firm’s website for more information about their services. For an appointment with a lawyer, call (251) 971-2676.