Learning how to use a secured credit card is very similar to learning how to use a regular credit card – the only major difference is the security deposit. The “secured” part of secured credit card means that you have to put down a cash deposit in order to get the card. The minimum deposit required is usually $200-$300, and you receive a credit limit equal to your deposit amount. You may also be able to add more money to the deposit later on, to increase your credit line.
Once the account is open, using a secured credit card is no different than using any other credit card. Secured cards look just like “normal” credit cards. Swiping or dipping your card in a merchant’s payment terminal is exactly the same. And secured credit cards are accepted anywhere that takes Mastercard, Visa, Discover or American Express, depending on which network your card is on.
The keys to using a secured credit card, as with any credit card, are to spend within your means and to pay your bill by the due date every month. That will help you build or rebuild your credit as safely and inexpensively as possible. Using only a portion of your credit limit and always paying your monthly bill in full are good habits, too.
Here’s how to use a secured credit card:
- Compare secured credit card offers to find a card with a low annual fee, and confirm you meet the approval requirements.
- Open a checking account, if you don’t already have one. Many secured credit cards require applicants to have a bank account.
- Submit your application and your $200 to $300+ refundable security deposit. Typically, you won’t have to place the deposit until after you’re approved. But sometimes, you will have to do it when you apply (they won’t take the money if you’re denied).
- Set up automatic payments from your bank account, so you never miss a due date.
- Make purchases with your secured credit card anywhere that accepts your card’s network. Or, don’t even put the card in your wallet. Just having an open card in good standing helps your credit score.
- Try to make sure the balance reported on your monthly statements is less than 30% of your credit limit.
- Pay at least the minimum amount required by the due date every month. That will keep your credit score improving. And you can avoid interest by paying your full balance.
- Keep track of your credit card statements and your credit reports to make sure there are no errors. Report any mistakes that you find.
Learning how to use a secured credit card is easy. Learning how to use a secured credit card responsibly is a bit harder. But as long as you pay your bills by the due date, you should see credit score improvement before long.