 TITLE: Understanding Secured Credit Cards CONTENT: If you're trying to rebuild your credit or have minimal credit history and need to build your credit, you've got a couple of options for doing so.\nYou may be able to become an authorized user on someone else's credit card account or have someone with good credit cosign on a credit card account for you. Parents often use these options to help their teens or college students establish credit. If you have bad credit, however, it may be hard to find someone willing to assume responsibility for your credit card charges.\nYou can also apply for a credit card tailored to people who have bad credit or a limited credit history. These are known as \"subprime\" credit cards. Unfortunately, unsecured cards offered to borrowers with poor credit often charge very high interest rates and fees.\nSecured credit cards may offer a better alternative. These cards, specifically designed to help people build credit, have many advantages:\n*   **You can get approved even with bad credit.** Card issuers will still check your credit history, but it's much easier to get approved for a secured card over getting an unsecured card. Because the security deposit eliminates risk for the credit card issuer, secured cards have much more lenient credit score requirements. Some secured credit cards don't even have a minimum credit score requirement.\n*   **Secured cards can help build credit.** At first glance, a secured credit card may seem similar to a debit card or a prepaid card. The key difference is that debit cards and prepaid cards don't report your payments to credit bureaus. As a result, using debit and prepaid cards won't help you build a credit history. As long as the secured credit card you're considering reports your payments to at least one of the three major consumer credit bureaus (Experian, TransUnion and Equifax), making on-time payments will help to improve your credit score.\n*   **A secured card can be a stepping stone to an unsecured card.** Many secured credit card issuers will convert your card to an unsecured card after you've demonstrated 12 months of on-time payments and improved your credit score. In some cases, you may need to request your card be converted, while other issuers will do it automatically. If your secured card doesn't offer this option, you can still apply for an unsecured credit card once your credit score is good enough. (You should regularly check your Experian credit report and credit score for free to see how they're improving.)\n*   **Some secured cards offer valuable benefits.** Credit cards offer benefits and fraud protection you won't get with cash or even a debit card. Some secured cards even offer benefits such as travel insurance, rental car insurance, damage or theft protection and extended warranty coverage. Many secured credit cards include free credit monitoring—a very useful benefit if you're trying to build your credit.\nOn the downside, secured credit cards often charge higher interest rates than unsecured credit cards, and many also charge fees. Credit limits are typically low, so you won't have the spending power you might have with a traditional credit card.\nFees and high interest rates aren't ideal, but if you have a limited credit history or a low credit score, a secured credit card is often your best choice. Think of a secured credit card as training wheels: By learning to manage a secured card responsibly, you can eventually move up to an unsecured credit card that offers better terms and a higher credit limit. END