If you've had some financial difficulty or found yourself in over your head with credit cards, you might be hesitant to have credit cards. Unfortunately, credit cards are almost a necessity in today's society. If you plan to travel you need a credit card to make car, hotel or plan reservations (even if you plan to pay cash once you arrive at the airport or hotel)!

If you've never had credit or are have earned a poor credit rating from past financial problems, it may be very difficult for you to obtain a credit card. It's possible however, that you would be able to obtain a secured credit card.

What Are Secured Credit Cards?

A secured credit card is much like a debit card. Your credit line is equal to the amount of cash you deposit onto the account. So if you make a $300 deposit on your secured credit card, you'll be able to use the card up to $300. Some banks that issue secured credit cards will allow you to add to your initial deposit in order to bring your available balance up higher, and some will increase your available credit line without your having to make deposits, provided you make your payments on time.

What Charges and Fees Are Charged to Secured Credit Cards

The fees on secured credit cards depend on the issuer of the card you get. Almost every secured credit card charges an annual fee, but the amount can vary dramatically from just a few dollars to a couple hundred dollars annually! This is the price to pay to re-establish your credit, basically. It makes sense to shop around though, to find a secured card with the lowest annual fee. Credit Unions sometimes offer their members no annual fee secured credit cards with low interest rates. It's important that you understand the extent of the fees you'll be required to pay, because there have been reports of people obtaining secured credit cards only to find their entire deposits have been eaten by the fees before they ever had a chance to use the card!

What is the Minimum Deposit to Get a Secured Credit Card?

While it will depend on the issuer of the secured credit card, you can expect to pay between $300 and $500 as the minimum deposit, and that your credit limit will be the amount you deposit, or a percentage above your deposit.

What to Avoid When Shopping for a Secured Credit Card

While secured cards can help people establish or rebuild their credit, and can give people the ability to make online purchases or reservations in addition to the daily spending that can be done using a credit card; secured cards are not always what they seem. Be sure to read the fine print of a secured credit card's terms and agreements. There are some card issuers who are out to take advantage of people who are in a difficult financial situation- when you get your secured credit card and make your first deposit, you might learn that you are required to purchase an insurance policy for $50 or $60 each month. Legally, the secured credit card must disclose this information to you, but you might have to look at it closely to find it!

Provided you take the time to research your secured credit card options before signing up for one, they can really help you build your credit. Secured credit cards report your payment transactions to credit bureaus, so you have a way to show you are making payments on time. This will result in a higher credit score over time and the ability to eventually get a regular loan or credit card that isn't secured.