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We all make mistakes in life, some more serious than others. One of the biggest mistakes one can make is to mess up one's credit. Credit is an integral part of modern society and it impacts just about all aspects of one's personal and professional life (these days, even employers routinely check the credit histories of prospective employees; people with bad or terrible credit scores are deemed "irresponsible" or "unreliable" to most human resource managers.) When your credit rating is OK, the possibilities and opportunities of life can seem limitless. But when your credit rating is bad, life can be quite stressful, even depressing, especially because in today's society, one cannot function normally without having at least one credit card.

So what to do when your credit is totally messed up? The only real solution is to rebuild your credit, and one of the best ways to rebuild your credit is by getting one or more Secured Credit Cards.

What Are Secured Credit Cards?

Secured credit cards are very similar to standard credit cards except for one significant difference: secured credit cards are "secured" by you depositing money into a savings account setup by the secured credit card provider. The amount of money you deposit into this savings account will determine your credit line; generally speaking, your credit line will be fifty to one hundred percent (50% to 100%) of the total amount you have deposited in your secured saving account. You can use a secured credit card to buy all the goods and services you want and need in life, and in doing so, over time, as you pay at least your minimum amount due every month and keep your account in good standing, you can rebuild or establish a desirable credit history.

Secured credit cards are great for:

    • Students who generally need to establish and build a credit history.

    • Consumers who have had some debt or credit problems in the past and who are looking for ways to rebuild their credit.

    • Consumers who have had major credit and debt problems in the past, and who are looking for ways to start all over again.

What Are The Disadvantages Associated
with Secured Credit Cards?

Because secured credit cards are "secured" by a savings account, they are relatively easy to get when compared to regular credit cards, but there are some disadvantages and potential negatives that you should consider, including:
    • High Fees: Secured credit cards often have very high fees associated with them when compared to standard credit cards. The annual fee, late fee, over limit fee, late payment fee and other fees that many people consider irksome with standard credit cards can seem downright oppressive with secured credit cards.

    • Can Hold You Back: The credit bureaus, banks, and other lending institutions know well the difference between a regular credit card and a secured credit card, and if you hold onto a secured card for too long, you are often judged to be "not ready" for a standard credit cards. This can hold you back as a consumer of credit, so hanging onto a secured credit card for many years is not a good idea.

    • Interest Charges: The interest charges on outstanding balances are invariably higher with secured credit cards. The companies that offer secured credit cards charge higher interest simply because they can. Therefore, as is the case with regular credit cards, you should make an effort to pay your entire balance in full every time you receive your secured credit card statement; this kind of payment discipline can end up saving you a lot of money in the long term.

    • Secured Credit Card Scams: Because many people who have poor credit are often vulnerable, many unscrupulous "companies" out there try to take advantage of the "sub-prime" market for credit by tricking people into signing up for scam secured credit offers. These rip-off artists often use language like, "EVERYBODY CAN QUALIFY," or "YOUR CREDIT DOESN'T MATTER TO US," etc. Be careful. Be selective. Do at least some research on the secured credit card companies you are interested in. There are many secured credit cards offers to choose from so take the time to shop around and get the best possible deal you can.

To conclude, secured credit cards offer an excellent way to rebuild anything from a slightly damaged to nearly ruined credit history, but because they are secured and often have high interest rates associated with them, it is wise to cancel any and all secured credit card accounts you have once your credit has been repaired.

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