A secured credit card works like any other credit card except that it is backed by a cash deposit made by the cardholder. The deposit acts as security which protects the issuer of the credit card while giving the cardholder the ability to rebuild his or her credit. Secured credit cards are normally issued to people with poor credit or very limited credit. Since the card issuer reports the payment history to credit reporting agencies, the secured credit card can improve the credit score of the card holder over time. Secured credit cards carry a higher interest rate than regular unsecured cards but can be converted to unsecured cards if payments are made timely over several months.

The best approach is for the cardholder to use the card each month while paying the entire balance each month. It is also ideal if the cardholder uses only 30% of the available credit each month. It is possible to speed up the process of rebuilding credit by obtaining more than one secured card.

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