Secured Credit

is a term use for a type of loan in which there is collateral. A mortgage, for example, is a loan which uses the house as collateral in the event that the debt cannot be paid off. In this case, the lending institution may collect the house (the collateral) in lieu of payment.

Because of the available security of the collateral for the financial institution, interest charges for a line of secured credit are usually lower than those in an unsecured line of credit.

A secured credit card means that you must deposit a preset amount into a security deposit account in order to make reliable your credit card. The security deposit amount will equal your credit limit. However, if financial affairs are conducted properly, such as staying within your credit limit and paying your statements on time, the card issuer may approve your account for an unsecured credit limit increase.

A secured credit card is like a stepping stone on the path to building good credit history and eventually enjoying the benefits of unsecured credit. An unsecured credit card looks and operates just like any other credit card and are readily available.