A Secured Credit Card is an alternative to the traditional Credit Card and can be availed by people who have a bad credit score and are looking to replenish their score. In short, Secured Credit Cards are special Credit Cards that are offered against a fixed deposit. By making timely payments on the Secured Credit Card, cardholders can rebuild their credit histories and score over a period of time. However, in case of delay or default in making payments, the dues are recovered from the fixed deposit. The card requires minimal documentation as the FD acts as a security deposit.
Read on to know how a secured credit card is different from a regular credit card and a student credit card.
Most Secured Credit Cards are MasterCard or Visa credit card and work exactly like typical Credit Cards. However, unlike regular Credit Cards, Secure Credit Cards involve a cash collateral deposit that serves as the credit line for the specific account. As a result, in case of default of payments, the fixed deposit can be liquidated by the bank to recover the debts. Also, while applying for the card, the issuer decides the credit limit you can afford and accordingly charges the fixed deposit, which cannot be closed till the Secured Credit Card is in possession of the cardholder. Usually, unlike regular Credit Cards, the credit card limit offered on such cards is 75% to 85% of the fixed deposit amount.