There are lots of good reasons to have a credit card. You can use it to protect your purchases from fraud, get a handle on your expenses, and boost your credit score. But if you’re just starting out and don’t have an established credit history or if you’ve had problems with credit, qualifying for a traditional unsecured credit card from a financial institution can be a challenge.

There is, however, a type of credit card that can help: a secured credit card.

A secured credit card uses money you provide as collateral to help you qualify. When you apply for one, you’ll make a refundable security deposit to the issuing financial institution, typically the amount you can borrow or credit limit. For example, if you open a secured card with a $500 deposit, your credit limit would be $500.

How secured cards differ from unsecured cards

Though both secured and unsecured credit cards provide a safe way to make purchases, they differ in a few ways:

• Credit history. With a secured card, you’re not required to have a credit history, which is often the case with unsecured cards.
• Collateral. With a secured card, you’ll need a deposit as collateral. With an unsecured card, the lender does not require collateral and assumes the additional risk.
• Credit limits. Your credit limit for a secured card is based on the amount of your security deposit and your ability to repay, while for an unsecured card it’s based on your income and credit.
• Interest rates. Unsecured cards usually have higher interest rates, though rates vary by lender.

The benefits of a secured card
There are many benefits of having a secured card, including:

• Easier qualifying. Because your deposit is used as collateral, it’s easier to qualify for a secured credit card.
• Help with credit. Secured cards can help you build or rebuild your credit. Keep in mind that if you don’t make on-time payments, you can adversely impact your credit.
• A steppingstone to an unsecured card. Secured cards can help you qualify for traditional, unsecured credit cards if you have a history of making on-time payments. Some lenders will return your deposit and automatically upgrade you to an unsecured card if you have a good repayment history.

How to determine if a secured card is right for you

In general, you should consider a secured credit card if you:

• Have money saved for the deposit.
• Don’t have an established credit history.
• Have blemishes on your credit.
• Eventually want to qualify for an unsecured card with a higher credit limit.

Avidia can help you find the right card

Avidia understands that different people have different needs when it comes to credit cards. That’s why we’ve partnered with TCM Bank to offer a range of credit card options, including secured cards. To find the card that’s right for you, visit https://www.avidiabank.com/personal/credit-cards/ or stop by your nearest branch.