Smart Tips for Using Your Secured Credit Card

If you have a secured credit card, chances are you’ve had trouble with credit in the past. Whether you’ve had a bankruptcy, a former spouse ruined your credit, or you are simply new to credit cards and don’t have any credit history, you’ll be on your way to a better credit score and a regular credit card if you follow these guidelines for using your secured credit card.

• Make a budget. Know how much money is coming into your household each month, and how much you can afford to spend. Write down fixed expenses like mortgage or rent, utilities, debt payments, groceries, and basic living costs. Don’t forget to factor in contributions to savings or retirement accounts, and leave some room for unexpected expenses. Then decide how much you can afford to spend on extras.
• Set up automatic payments. When you’re trying to rebuild your credit score, it’s very important to make sure you always make all your payments on time. If you set up automatic online payments, you’ll never to miss a payment due date. You can make the payment for the minimum amount due, and then pay more if you want to anytime during the billing cycle. By setting up automatic payments you protect yourself from fees and negative credit reporting.
• Order copies of your credit reports each year. Make sure you’ve carefully reviewed your credit report to ensure that there is no inaccurate information in it. There are three major credit bureaus—Experian, Equifax, and TransUnion—so order a copy from each one and review them carefully. You can do this free of charge once a year.
• Be careful of fees. Secured credit cards sometimes carry higher fees than other types of credit cards. Read the terms and conditions carefully so you know exactly when, and for what, you might be charged a fee. Using an ATM to get cash, going over your credit limit, making a late payment, and ordering copies of statements are all things that can incur a fee.
• Don’t max out your card. Just because you have a certain limit on your credit card, doesn’t mean that is how much you should spend. To get the best credit score, use no more than 30% of your credit line. That means if you have a credit limit of $1,000, you should keep your balance under about $300.
• Keep an eye out for new offers. When you’ve have your secured credit card for a while, it will probably be time to get a new, unsecured card. When your credit score begins to climb, you are likely to get more credit card offers. Don’t apply for all of them, and be discerning about which ones you might be interested in—but do stay alert for good offers.

Using a secured credit card can be a great way to establish or repair your credit. Think of it as a tool or a stepping stone, follow the above rules, and before you know it you’ll be on your way to improved credit and an unsecured credit card.