Secured Card

Secured Card

A credit card with a credit limit that is at least partially collateralized by funds in a special savings account. That is, a cardholder places a certain amount of money into an account with the credit card company, and this is used to protect the company from the cardholder's default. Depending on the cardholder's credit history, he/she may be required to place anywhere from 50% to 100% of the credit limit into the savings account. These funds still belong to the cardholder, and he/she may retrieve them if he/she pays off or cancels the secured card. Because this reduces the risk to the credit card company, it may charge a lower interest rate. Secured cards are particularly useful for persons with bad credit or little credit history.