Secured Credit Card confusion.

[moneytrouble]

Can anyone explain the benefits of a secured card to me? It is based on how much money I put in, they charge me an enormous fee, have direct access to my checking account, and then add on 9.9% for purchases on top of that. How is this beneficial, when I can just use my free checking card, and build credit through my student loan. Secured credit cards seem like some type of gangster crime lord credit borrowing to me. Maybe I am not fully understanding this process though.

[StartingOver08]

Most secured cards will refund the deposit after X months of on time payment so you end up with an unsecured card. From what I have seen, the most typical time is 12 months of on time payments then the card is unsecured. In the meantime, you get regular increases in your credit limit without having to put up additional security.

If you go thru a credit union you get much better rates than with a typical credit card and you can establish a good repayment history that increases your score (if that is important to you). You are right, some of the cards are notorius for outrages fees - stay away from them. This is your new beginning, be very selective.

[kvangild]

[moneytrouble]

Thanks!!! I live in the highest unemployment state in the nation, had the highest foreclosure at one point, and I am sure loan defaults are extremely high. I went to a CU a few weeks before my discharge just to see what could be done after. She told me she would not speak to me at that time, and to come back after the discharge. She said they may be able to do something for me, but with the discharge, it was highly unlikely. I mentioned signing up for a small account, and again she stated they may not be able to do anything for me. I read somewhere that it may have to do with me foreclosing(not reaffirming) on my house in the bankruptcy, and CUs are really against foreclosures. Here is a post from someone who ran into the same issue I did with the CU:

http://www.bkforum.com/showpost.php?p=286859&postcount=16

[moneytrouble]

Funny you mentioned #4. I just had to put $250 down with my debit card, to rent a car.

[moneytrouble]

[deleted].

[StartingOver08]

Also, remember each CU is 'member owned' so there are different underwriting rules for each one.

The security deposit is typically sent back to you in a check.

Kvangild is right about the interest rate (and the rest of his post!) - it doesn't matter if you pay off every month. It's the fee's that you need to be aware of when shopping these type of cards. Some of the issuers are "fee harvesters" - stay away from them.

[UpsideDown]

I just got one from my CU that has no fees.