A credit card is the quickest way to build good credit, but you often cannot get a credit card without good credit history or due to other reasons like low salary, Non-Listed company Employer, etc. This is where secured credit cards come to the rescue.

Secured credit cards can help people with bad or No credit histories escape this paradox. Here’s what you need to know to understand secured cards as well as how they differ from regular unsecured Credit cards…

Secured Credit Cards UAE

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• What is a secured credit card?

A secured credit card is one that is backed by a cash deposit you make when you open the account. The deposit is usually equal to your credit limit, so if you deposit AED 200, you will have an AED 200 limit. The deposit reduces the risk to the credit card issuer. If you do not pay your bill, the issuer can take the money from your deposit. This is why these cards are available to people with bad credit or no credit.
A few secured cards may allow you to upgrade your account directly to an unsecured card. Others do not have an upgrade process, so you will have to apply elsewhere, then close the secured card. When you upgrade or close a secured card, the issuer refunds your deposit.

• How are secured cards different from regular credit cards?

Whether or not you need a secured card comes down to how good your credit is. For unsecured cards that do not require a deposit and therefore pose more risk to the issuer, credit-card companies typically require at least average credit, and good or excellent credit for the best ones. On the other hand, you can get a secured credit card even if you have poor credit since they work on deposits. Some unsecured credit cards advertise themselves as easy to qualify for even if you’ve got bad credit. But these cards usually charge extremely high fees. Hence, we recommend you to apply for a secured card rather than a high-fee unsecured card.

• How do secured credit cards work?

Once you pay the initial deposit, secured cards work just like unsecured ones. Here’s how:
You can use them wherever credit cards are accepted, including online.
You can build your credit by using the card responsibly and paying your balance on time.
You incur interest if you carry a balance.
If you cannot qualify for an unsecured card, a secured card can be a great tool as you look to improve your credit. But it is important to be responsible with a secured card, just like you would with any other loan or bill that shows up on your credit report.

• How can you use a secured credit card effectively?

Although they require a deposit, secured credit cards are a great tool for rebuilding credit. You should use one most effectively by keeping the following tips in mind:
Use the card sparingly and make only one or two small purchases every month.
Pay your balance in full every month. When you pay in full, you will not be charged interest. Interest rates on secured cards are usually higher than those on unsecured cards.
Keep an eye on your credit score. When it significantly improves, ask your issuer about upgrading to an unsecured card.

Many people find that by using a secured card carefully, it takes only about a year to improve their credit score enough to qualify for an unsecured card. Some issuers will let you transfer your secured line of credit to an unsecured one, which is better for your credit score because it does not require you to open a new account. But if you do have to apply for a new unsecured credit card, you may be able to enjoy some of the benefits of having good credit, such as lower interest, rewards and lesser fees. When that day comes, using this time to rebuild your credit with a secured credit card will have been worth it.