Function

• A secured credit card functions much like a "normal," or unsecured, credit card, with a few major differences. As the name suggests, you "secure" it by making a cash deposit. The amount of your deposit functions as your credit limit, or the maximum amount you can charge to your card. Also, unlike many unsecured cards, all secured credit cards charge annual maintenance fees.
  
  

Advantages

• Secured credit cards report to the three major credit bureaus on a monthly basis. Bankrate, a financial information website, suggests using a secured card to make small purchases and paying the balance off at the end of each month. Doing this will improve your credit score and help you build positive credit history. Additionally, if you use the card responsibly, you may qualify for an unsecured card from the same company within a year. Also, the deposit you made to activate the card will earn interest over time.
  
  

Disadvantages

• Secured credit cards typically carry low credit limits, rendering them impractical for large purchases. Additionally, secured cards usually have higher interest rates than normal credit cards. In addition to the annual fees, some secured cards charge application fees, monthly fees and even recurring insurance fees. If you default, or fail to make required payments, on the card, you will lose your deposit, including any interest it earned while your card was open.
  
  

Conclusion

• While secured cards can help you begin the road to credit repair, they also have several potential pitfalls. Responsibly using a secured card will raise your credit score, while irresponsibly using or abusing the card can further damage your credit. Additionally, a secured card alone will not return you to good-credit status. You must combine responsible use of the card with good financial habits and other credit-repair strategies. Disputing errors on your credit report, getting a small installment loan and sticking to a regular budget may help repair your credit profile.