When you apply for a secured credit card

Secured credit cards are a type of credit card that requires a security deposit, which serves as collateral for the credit limit. These cards are designed for individuals with limited credit history or poor credit scores, as they provide an opportunity to build or rebuild credit.

Here's how secured credit cards typically work:

1. **Security Deposit:** When you apply for a secured credit card, you are required to provide a security deposit to the card issuer. The amount of the deposit is usually equal to the credit limit you are approved for.

2. **Credit Limit:** Your credit limit on a secured credit card is determined by the amount of the Secured Cards deposit you provide. For example, if you provide a $500 security deposit, your credit limit will likely be $500.

3. **Card Usage:** You can use a secured credit card just like any other credit card. You can make purchases, pay bills, and even withdraw cash from ATMs, although cash advances often come with additional fees and higher interest rates.

4. **Credit Building:** One of the primary purposes of a secured credit card is to help you build or rebuild credit. Card issuers typically report your payment history and credit utilization to the major credit bureaus, which can help improve your credit score over time if you use the card responsibly.

5. **Interest and Fees:** Secured credit cards may have annual fees, interest rates, and other fees similar to traditional credit cards. It's important to review the terms and conditions of the card carefully to understand the costs involved.

6. **Graduation to Unsecured Card:** Some secured credit card issuers may offer the opportunity to "graduate" to an unsecured credit card after demonstrating responsible credit behavior over time. This typically involves a review of your credit history and may result in the return of your security deposit.

Overall, secured credit cards can be a useful tool for building or rebuilding credit, but it's important to use them responsibly. Make sure to pay your bills on time and keep your credit utilization low to maximize the positive impact on your credit score.