Secured Credit Cards

What are secured credit cards? I found myself asking this question, although I knew what “secured” meant in general, as related to the financial and lending industry – it meant you had to put up some sort of “collateral” in oder to secure a line of credit from a bank of lending institution.

So for example, you want to secure a line of credit or a credit card for whatever purpose.

You may need to sign over your vehicle or a portion of your home equity in order for the lending institution to guarantee they would have something of value in the end if you failed to pay off your debts to them as promised.

Secured credit cards are really no different of a concept.

Here are the definitions of a secured credit card, as defined by lending institutions and authorities in the financial industry themselves :

A secured credit card is a credit card which is secured by a savings account that has been established in advance by the individual borrowing the money.

The amount of money in the account usually directly determines the lending ceiling on the credit card. These types of secured accounts are very low risk for creditors since they are guaranteed to come out with something, and are much easier to obtain because of that fact.

OR : A credit card secured by a savings account where the amount of credit extended to the borrower is equal to the amount of savings in the account.