Secure Credit Cards - What are These Actually?

One unusual type of credit card is referred to as a secured credit card. The name says it all - these cards are secure because they are backed by your cash. In other words, by keeping cash in an account you have opened with the lender, you maintain a balance that provides security for that lender.

Why Would You Use This Card?

The limit available to spend on your secure credit cards depends on how much money you have in the account and may range between 50% - 100% of those funds. As you might notice, these cards aren't really credit cards and in practice, they are often used more as debit cards.

Why would you use a secure credit card? Well, as you already know, credit debt is a big problem in our society today. This is in part due to simple over shopping and over charging by people who haven't grasped personal money management facts.  

Increasingly, credit debt is causing real problems for those who have lost their jobs and used available credit to pay their daily expenses. Another major credit problem arises when huge medical bills occur and the payments become too high. In other words, use of a secured credit card is often the only option available to people who have bad credit ratings.  

Those with bad credit ratings aren't the only consumers who choose to secure their charge cards with cash, however. You might feel safer carrying a credit card than having cash in your pocket yet not want to deal with monthly bills and due dates.   

Are You an Impulse Buyer?

Another group of people that is ideal for secured credit cards are these who are inclined to make impulse purchases. If you are like me, you will go to the mall to window shop and always end up buying a few things. As long as you can back up these purchases without allowing them to affect your economic balance, you should not be in danger.

However, some shoppers have a real problem and buy products they don't need and won't use because they get a rush of pleasure when making a purchase. These people are addicted to shopping. It can become a dangerous cycle of buying unneeded items, feelings of guilt because so much money was spent and then fear when the bills arrive.  

This can lead to friction in a relationship where money is tight.  There is no positive aspect as the addicted shopper doesn't enjoy the purchases except at the moment he or she pays for them.

While secure credit cards are not a solution to this problem, they can be used to limit those wild shopping sprees as you set the limit yourself by the amount of money you deposit. There are no credit limits to be raised or exceeded. If you can't say "no" to yourself when you go shopping, the secured card will say "no" for you.

Use Secure Credit Cards and Stay Out Of Debt

When secured cards were first introduced they identified the users as people who could not qualify to get credit. That reputation has changed as the cards are now the choice of a growing number of people who refuse to go into debt. Those no debt consumers were usually older people until recently.

In large part because of the avalanche of credit card debt and economic problems the ‘no debt’ lifestyle is gaining popularity with consumers of all ages. It is no longer fashionable to complain about charging too much to your cards as the current fad is to be debt free.

Stories of predatory lenders, high interest rates and hidden fees added to credit card accounts have made some afraid to use credit cards. They may have watched a family member or friend crushed by debt. Some grew up in families where credit cards were used and the bills led to anger or shame.

With a secured credit card, you will not be able to charge more than you can afford because you have already paid the money up front. If you want to keep out of debt yet be able to still use credit cards, a secured credit card might be just what you are looking for.