For those struggling with poor or nonexistent credit, a secured credit card may be a feasible option. Basically, a secured credit card is “secured” by a deposit ranging anywhere from 10% to 100% (or more!) of the full line of credit being requested, to be held in escrow in case the card holder fails to make regular payments.

Someone requesting a $1,000 line of credit, for instance, may be asked to put up anywhere from $100 to $2,000 as a security deposit on the account, depending on the severity of their credit situation and the offer being requested.

Holders of secured credit cards are still expected to make monthly payments on their balance, just as they would with an unsecured card. If they fall very delinquent with their payments, the card issuers have the option of recovering the security deposit as payment. Normally, if just one or two payments are missed, the card holder would be given the opportunity to bring the account current and pay a penalty, as with an unsecured card. Of course, if the account becomes so delinquent that it is closed, the account holder will not only forfeit the deposit to pay the principle debt, but will likely be left with heft fees and penalties as well.

Secured cards are a good option for those with less than stellar credit, because, even with higher-than-normal fees, the total cost for a secured card can be less than the astronomical interest charged on unsecured cards for those with very poor credit – provided they can even obtain a card. The terms and conditions of a secured credit cards are furnished to the consumer at the time of the account being opened, just as with other cards, and should be reviewed carefully by the consumer to be sure he/she knows what they are getting themselves into.