Is Everyone Eligble For A Secured Credit Card?

I often think of secured credit cards as the perfect hybrid between a debit card and credit card.  Like a debit card, you cannot go into debt; You are only allowed to spend what you have in your account.  Like a credit card, you still receive rental car insurance and chargeback protection in case you do not receive the goods or services you paid for.

Everyone Should Qualify For A Secured Card, But…

You would think that there is little risk to banks when they offer a secured credit card.  Like a gift card or a cash card, you would think that anyone would qualify.  This article in today’s New York Times points out that people who have recently discharged a bankruptcy are actually getting denied secured credit cards. For example, Bank of America and Wells Fargo both require that applicants for their secured credit cards be out of bankruptcy for at least a year.  Other banks reported acceptance on a case by case basis. Capital One and HBSC will accept anyone unless a background check brings up other major discrepancies.

Why This Is Important

The reason it is important is that secured credit cards can be a critical way that people emerging from bankruptcy can begin to rebuild their shattered credit.  There are many disreputable institutions that prey on these people by offering them secured credit cards that are loaded with fee after fee. These fee ridden cards always come up when there is a list of the worst credit cards. To avoid these predatory card issuers, it is best to look for a card offered by a reputable major bank.  It is disheartening to know that some of these banks will turn customers away from the products they need the most.

What Should You Do

If you are recently out of a bankruptcy, and you are having trouble getting a secured card that is not a fee trap, don’t give up.  Try the two banks mentioned in the article, Capital One and HSBC.  Even if you do not have a bankruptcy in your past, a secure credit card might still be a wise choice.  Some people just do not have the self control to avoid going into credit card debt.  While many of them turn to cash or debit cards as their method of payment, they are still giving up all of the protections offered by all credit cards, including secured cards. By using a secured card instead of a normal credit card, they can be guaranteed to stay out of debt.