Understanding Secured Credit Cards

In today’s digital world, it’s hard to do anything without a credit card. Sure, a debit card helps. But life’s little emergencies always seem to pop up when you’re short on cash. If you haven’t established your credit yet, or if you’re trying to improve your credit, a secured credit card may be the way to go.

What is the difference between a secured credit card and a traditional credit card?

A traditional credit card is a credit line determined by several aspects of your credit history. It is unsecured, so there is no collateral for the lender to collect if you default on the credit card. A secured credit card is funded by you up front. The amount you deposit for the card will determine your credit limit.

Why choose a secured credit card?

  • It can help you live within your means and avoid falling deep into debt while trying to build or rebuild your credit.
  • It can strengthen your credit score by helping you use credit wisely.
  • If you have bad credit, unsecured cards may carry high fees or come with high interest rates.

Tips to rebuild credit with a secured credit card

  • Charge small amounts. It’s easy to keep a low limit because you’re funding the card, but it’s also wise to charge only what you can afford and to pay off the entire balance each month.
  • Keep your credit use low. If you do carry over a balance, keep the balance-to-limit ratio low.
  • Pay your bill on time, every time. Doing so shows good money and credit management and will help raise your credit score.

How to open a secured credit card

Beginning this June, HealthNet will begin offering secured and unsecured credit cards. If a secured credit card is the best option for you, start saving now! Once the credit union begins offering credit cards, have your secured deposit ready and available. Secured credit card limits will start as low as $500.

For more financial tips, visit your local credit union. HealthNet Federal Credit Union has proudly served Baptist Memorial Health Care employees and the health care community throughout the Mid-South for more than 60 years. For information about the credit union, please call 901-226-1111 or visit www.healthnetfcu.org.