Is There a Credit Line With Secured Credit Cards?

All secured credit cards have credit lines, which are called credit limits. Credit limits restrict how much you can charge on the card. On secured accounts, the credit limit usually is equal to the amount of money you deposited to open the account. Some banks establish a credit line that is a little less than the cash you have on deposit. The money acts as collateral, removing risk for the bank in case you default on the credit card payment.

Purpose

Secured credit cards appeal to people who are seeking their first credit card and those rebuilding their credit. The cards are easy to qualify for because of the collateral provided by the deposited money. These credit cards can also be expensive because of the high interest rates charged despite the collateral. Some banks also charge a fee to open the account, and expensive, over-the-limit fees sometimes are assessed, because most people start with low credit limits of around $500. That low amount makes it easy to exceed the credit limit by a few dollars, triggering extra fees.

Increases

Some banks increase your credit limit after you make an additional deposit, while others automatically grant increases after about a year if you never miss a payment. Some people with small initial credit limits create a cushion by making an additional payment besides paying their balance in full each month.

Upgrade

Some secured credit cards maintained in good standing become eligible for an upgrade to unsecured status. This eliminates the need for collateral and shows that you are making significant progress building credit. Banks have their own guidelines for upgrading accounts but consideration often is possible after 12 to 24 months.

Biweekly Payments

Biweekly payments to your secured credit card account are a way to impress the card company and become eligible for credit limit increases and upgrades. With biweekly payments, your payment will never be late, and, over a year's time, you'll make 26 payments -- 14 more than you would make with the 12 monthly payments. On-time payments and keeping balances low are keys to effective credit management.