Many people use secured credit cards to help build up their credit score by improving their overall credit history. This can be done, in many cases, for anyone with bad credit because a typical secured credit card may have a lower interest rate than an unsecured credit card.
Secured credit cards work just like unsecured credit cards except they are backed by a bank account in which the cardholder deposits money to secure the card. This often accounts for a more manageable interest rate for someone who may have bad credit.
Anyone who is serious about improving their credit history may benefit from a secured credit card because a secured credit card requires that one be financially responsible or they will lose funds from the bank account securing the card and also do harm to their credit score.
Simply put, not using a secured credit card properly is going to cause you to lose the money for the charges that you made and hurt your credit score at the same time. Anyone that is thinking of using a secured credit card should make sure they are in the position to be financially responsible by saving, budgeting, and making purchases that are necessary.
Also, it helps to build one’s credit history if they save the money for purchases beforehand. Using a secured credit card is one way that practically forces you to develop better financial habits because, again, you are going to have to secure the card with money which sets the card limit and any future failure to pay your charges causes the bank simply takes the funds from the bank account.
However, anyone that responsibly uses a secured credit card to build their credit history may see interest rates on their unsecured credit cards lower or their lender may offer them an unsecured credit card after a specific amount of time where they have used the secured credit card to rebuild their credit history.