If you find yourself stuck with a poor credit rating, and many people do, you probably have given up on the thought of ever owning a credit card again or getting approved for a department store credit card. The credit rating system can be a self-consuming paradox, because you might not be able to repay your debt due to economic circumstances. Not because you’re a dead beat, but because that is life sometimes. Then when you’re unemployed, you need to eat somehow, so you use your credit cards to live on in the hope that you will get a new job soon and pay it all back to catch up. If only that were true right?

What really happens is that you finally get work again, but are reluctant to hand over all of your new money to the credit card companies. Believe it or not, they WANT you to do this. The more screwed up you are, the more money you will owe them. Even if they know you’ll never be able to pay it back, they want to get as much debt on the account as possible because it will generate a higher cash payment on your account when sold to debt collection agencies.

So you can see that this cycle could and does go on forever and ever until you die or go bust. One option you have when you are in the credit crapper is to get a secured credit card. This is a credit card that is issued to you only after you have sent the issuing bank a security cash payment for them to hold against the credit card account. The amount of the security deposit is often the exact same amount of the credit card limit. That tells you one thing, they don’t trust you for anything. This way if you don’t pay your bill, they just use the security deposit to pay it off and then cancel the account altogether.

Secured credit cards normally carry horrible interest rates, like 26% and even more sometimes. This is not the reason you want this credit card though, and everyone knows that. You use it to show the bank and credit reporting agencies that you can pay your bills on time now.

The best advice to follow when it comes to secured cards is to NOT use them like a regular credit card. DON’T go running the card up to the very limit and then be late with the next payment. This will only worsen your credit rating. Use it once or three times a month to buy something for $50.00 and then pay it off every month. Before long, they will likely send you an offer for a credit limit increase. That is up to you, if you feel you can handle having more credit then by all means go ahead, just keep in mind what got you to that point to begin with.

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