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Problems with Secured Credit Cards


Although, secured credit cards can be very helpful to build or improve credit score but they can be expensive. Sometimes, these cards are marketed by dishonest lenders.

Some common pitfalls of using a secured credit card are as follows:-

  • The Fees: – Secured credit cards often come with higher fees. More interest needs to be paid because the user does not have a solid credit history. Once a credit score is built, lenders will be assured by financial part of the user. Apart from higher interest rates, some other fees like- application fee, processing fee and annual fee are also applicable. These fees may be almost as much as the line of credit.
  • Credit Reporting: Secured credit cards are used to build or repair credit. After you have done that, it is best to move on. However some secures credit card providers do not report to major credit reporting companies (Equifax, Experian and TransUnion). Most of the lenders use these three credit bureaus as an information source, when evaluating a person as a borrower. So users should ensure that they appear where they are looking. Before getting a secured credit card, user should ask if the provider reports to credit bureaus.
  • Outright Scams: – The user can avoid chances of being scammed by sticking to the reputable lenders only.
  • While shopping for secured credit card, user should read the fine print carefully because some additional charges may also be there such as- a transaction charge will be applicable on an ATM withdrawal.
  • Before applying for a secured credit card, user should ask the provider whether you will have to pay any application fee and whether it is refundable or not if your application is turned down.
  • User should ensure that credit card company will provide a complete refund of the security deposit if user decides to close the credit card account after paying off the entire balance.
  • User should verify with the bank whether they are providing any insurance for security deposit. This insurance helps the card holder credit card provider holding the security deposit declares bankruptcy.
  • Users should avoid offers for secured cards that do not have any brand name such as VISA, MasterCard, American Express etc. The lesser-known cards may be accepted at only a few stores. They may require you to make purchases from a specific catalogue.
  • Any offers for secured credit cards from issuers outside the country should not be accepted. If After getting the card, user will face any problem then it may be difficult to resolve them due to different country.
  • Sometimes, secure card companies offer extended interest free periods on purchases made with their card. The terms and conditions of these offers can vary, but generally, if user has not paid the balance in full by the time the interest free period ends, he/she will have to pay higher interest rates from the date, that purchase has been made. This can end up being very much expensive.

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