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Plan Well, Retire Well

Saving and investing your money
secured credit

How Can I Build a Credit History? Consider a Secured Credit Card

I frequently hear, "I can't get a credit card because I don't have a credit history, but how can I get a credit history without a card?" It can be tough to get that first credit card at the best of times, and with a tight credit market many young people are especially finding it hard build their credit history. What's can you do? One possibility is to apply for a secured credit card.

A secured credit card requires that you deposit money in an account as collateral. Often, but not always, this money will earn interest. Typically the amount you put in as collateral will be your credit limit. For example, if you deposit $500, then your credit limit will be $500.

All secured credit cards are not the same. You need to ask questions and read the credit card agreement to understand:

1) What interest rate will be charged on revolving balances?

2) What fees may be charged, and for how much?

3) What is the grace period – the number of days you have to pay your bill before interest charges begin?

4) Make sure the credit card agreement does not require any other expenditure from you, such as set-up fees or the purchase of an insurance policy.

Double-check that the company issuing the secured credit card will report your payment history to credit bureaus. In this way you can begin to build your credit history by making payments on time.

Check with local credit unions and banks to compare their secured credit card offers. In addition, websites like have lists of financial institutions offering secured credit cards.

Once you have a secured credit card, it will function just like a regular credit card. Over time, the financial institution which issued the card may raise your credit limit as you pay your bills on time and prove to be a good borrower. Using a secured credit card is not the only way to build a credit history but it is a possibility to consider.

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