Understanding Secured Credit and Unsecured Credit How you spend your money and if you pay your bills on time are all a part of your credit worthiness, your credit rating and your credit report. Understanding how to build and repair your credit with credit cards, through paying your bills on time, and by using your credit responsibly is going to set you for a more stable future with your credit. Your credit is important for when you have emergencies, when you want to buy a large ticket item and when you need cash for whatever reason. The Secured Credit Card A secured credit card is actually a savings account that you build. You put your own money into this account, and in turn you are given a card that is in all respects the same as credit card, a charge card where you can go anywhere in the world and use this charge account as you would any other charge card. Your money is your guarantee that you are going to pay back the money that you charge. If you fail to pay back the money that you charge you will loose the money that you put in the savings account to guarantee this account. Usually the financial institution that is setting up this savings / charge card account for you will be under no risk in offering you credit because your credit limit will be limited to the amount of money that you put in the savings account. When is a secured card right for you? Setting up a secured credit card is a good option if you have no credit currently. Having no credit is sometimes just as bad as having a bad credit rating because the banks do not know how to rate your ability to pay on your bills, and they cannot rate how responsible you are with your money. These situations include but are not limited to: when you are just out of college, when you are getting out on your own for the first time and never had to pay bills, or when you have always had the cash to pay for anything you want but you would like a credit card. A secured credit card is also good for rebuilding your credit. If you have been late on bills, if you have declared bankruptcy or if you have been so far behind on your bills that you do not have any credit lines or credit cards left, rebuilding your credit with a secured card is a good answer. You put you money in a savings account as much as you want, and you can use your charge card, repay the bills and prove you are more responsible with your money than you were before. Unsecured Credit Cards An unsecured credit card is a credit line that you can use to buy goods or services without having the cash upfront. An unsecured credit card is issued to you based on how well you pay your bills, if you pay your bills on time, with the credit line usually based on your income and the amount of debts that you have already. For example, when you make twenty thousand dollars a year, you are not going to be able to get an unsecured credit card for ten thousand dollars, but you are more than likely going to be eligible for a credit card with a spending limit up to a thousand dollars. Various financial institutions through out the country offer unsecured cards and they make their money by the interest that you pay on the purchases that you make. When you pay your card off in full every month for the purchases that you made, the credit card issuer is not going to make any additional money from your purchases or use of their credit card. Who can get an unsecured credit card? Anyone can apply for an unsecured credit card and your situation will be reviewed. Each financial institution has their own set guidelines that they follow when issuing credit cards and the limits of the credit cards are what is most strict depending on the amount of money that you make each year. The longer you have been at your job, the more money you make, and the better your credit rating the higher your credit card limit could be. This same set of guidelines also effect your interest rate, the amount that you are charged on the purchases that you make when you don't pay back the full amount within the thirty days of purchase. As your credit rating gets better and you have proven to pay your bills over a period of a year, or two years, your accounts are reviewed and you could be eligible for even a high credit limit or a lower interest rate.

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