Forgive me if I'm missing something obvious, but what exactly is the point of a secured credit card - how is it really different from just paying in cash?
(I'm from .au, where secured credit cards apparently don't exist, but I've read about the concept on the internet in the American context)
So if you have no history of paying back loans the bank doesn't want to loan you money unless you put up collateral. You use it to build up a credit history without risk of default to the bank - if you default they keep your collateral.
Secured cards aren't intended to be used long term. They are only for when you don't have a history (or poor history) of paying back debts. Many (most?) secured cards automatically convert to a non secured cards after a while, like six months or so.
Thanks. Interesting to know - I wonder why banks over here don't think they're particularly necessary. (I got my first credit card, unsecured, when I was still an undergraduate working part-time and receiving government welfare payments...)
> Thanks. Interesting to know - I wonder why banks over here don't think they're particularly necessary.
I suspect that there are probably regulatory or other systematic differences that make them not worth offering; while they are sold here as ways to build credit they don't seem to actually be necessary to that purpose. Even without credit cards, most people seem to be able to build a history of having and paying financial obligations that will result in sufficient credit to qualify for regular (if low-limit) credit cards in a reasonable period of time without secured cards.
My card was issued somewhere I have no credit history. The point of the card is to have access to a credit card -- with its benefits -- without needing to borrow from the bank.
(I'm from .au, where secured credit cards apparently don't exist, but I've read about the concept on the internet in the American context)