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November 06, 2006
Confused About Secured Credit Cards?
I just finished posting an article about acquiring a secured credit card in order to restore credit and provide you with the ability to have a Visa or MasterCard.
Having just got off the phone with a visitor there seems to be some confusion as to how a secured card works.
The question was:
"When I place my deposit on a secured credit card, is the deposit used to pay my monthly bill?"
This is a very good question and the answer is:
No, the security depsosit is only used as an insurance policy for the bank. Quite often the security deposit is tied up for as long as 2 years.
You are still expected (and required) to pay your balance the same as with a regular credit card.
Keep in mind that I am speaking generally here and you MUST read the terms and conditions for the card you are applying for as each bank sets out it's own terms.
If you are looking for a credit card that you pay upfront and the balance is deducted when you make purchases, you will want a prepaid debit Visa or MasterCard.
Prepaid cards are NOT secured cards, Prepaid cards are essentially the same thing as your bank debit card for your savings account with the only difference being that the Visa or MasterCard logo is on the card.
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