A secured credit card is usually the only option to rebuild credit for people with recent bankruptcy or other problems in a credit history.
From the outside, these cards work like a regular credit card: you swipe it or pay online and the merchant gets the money for purchases. All your purchases accumulate on a card balance, which you can repay in full at the end of the month or within the grace period of 20-25 days.
The main difference with the secured card is the security deposit you need to put down as collateral against your credit line. There are two types of secured cards: a credit limit exactly matching a security deposit (i.e. $500 credit limit with a $500 security deposit) and the ones that let you have a credit line bigger than your security deposit (so-called hybrid cards).
Some cards issuers review your case from time to time and can offer you an unsecured card eventually. Others let you apply for an unsecured card after a period of good use of the secured card.
The main goal of the secured card is to let you rebuild your credit to be able to get a regular card when your FICO score is good enough.
Therefore, with a secured card you should:
Here are my favorite secured cards for 2016:
$25 annual fee
$0 first-year fee
reports to credit agencies
24 days grace period
unsecured card offer after 12 months
What to look for when shopping for a secured card:
It is good to have a card with a FDIC secured and interest earning security deposit to earn something while your money is sitting in the bank account.