Most credit cards are unsecured—that is, you don’t have to put up any collateral to get them. But you do with a secured card: Your deposit into a savings account serves as the collateral. The amount of the required security deposit varies from card to card, but the minimum amounts generally range from around $200 to $300. You might even earn interest off your funds, just as you would in a normal savings account.

Your credit limit is usually the same as the amount you deposit into the savings account (matched dollar-for-dollar). With a few cards I’ve seen over the years, the limit has even been higher than the required deposit. For example, a secured card might advertise an initial credit line of 130%, so your deposit of $300 would get you $390 in available credit.

A secured card is often the best answer if you can’t get a traditional card. Secured cards are accepted wherever credit cards can be used, and certainly come in handy for emergencies and for transactions when having a card is advantageous, such as when you’re renting a car.

Secured cards function just like other cards. If payments aren’t made in full each month, you’re charged interest. The lender will not tap into your savings account for the interest—or the payments. If you’re late with a payment, the rate goes sky-high, just as high as it would with an unsecured card. And if you use the card irresponsibly, you’ll damage your credit. The security deposit won’t help.

If you can squirrel away the $200 or $300 needed for a security deposit, it’s likely that you can get a secured card, which will help you:

Important! Not all secured cards report to the three major credit reporting companies (Experian, Equifax, and TransUnion). To build or rebuild credit, it’s smart to get a card that does report to all three. Fortunately, many secured cards report to them all, but make sure before you apply.

Most companies don’t actively advertise secured cards. But CardRatings.com lets you compare offers and even apply online. Just click on “Poor/No Credit” from our home page. It’s also a good idea to check with your local bank or credit union.

It pays to find a low-fee secured card. You could spend more than $100 a year on a few cards, with their annual fees and hidden processing charges (for “registration” and “setup,” for example). Many alternatives exist, so there’s no point in paying fees like that. Fortunately, the total yearly fees on many secured cards are less than $50. In fact, several have annual fees in the range of $25 to $40, with no processing or up-front fees.

Just because you have no credit or poor credit doesn’t mean you have to settle for the highest rates known to mankind! You should be able to find an ongoing purchase APR in the midteens, although rarely I have even seen rates around 10%. Definitely avoid any rates in the upper teens or above 20%. Shop around, and visit CardRatings.com to see what issuers and cardholders are saying about the newest offerings.

Unfortunately, secured cards normally don’t have introductory rates. One notable exception is being offered as of this writing by Wells Fargo, just to its banking customers: a secured card with a teaser rate of 5.9% for six months. Maybe your bank will be running a special promotion for depositors. Ask!

I can’t stress enough the importance of always reading the fine print. It’s the only way to find out key facts: For example, what happens if you’re late with a payment? And what’s the length of the grace period? Making sure you’re clear on the details will help you get on the right path and build a solid credit history.

It’s a good idea to choose a secured card that helps you make money on your deposit. The good news is that many do, but you should verify this before you make your final choice. You might earn only 1% to 2% in interest, but that’s definitely better than getting 0% on your hard-earned money. Also, if you have to carry a balance on your card, you can effectively offset your finance charges by 1% to 2%.

Hopefully, it’s just a mistake, so first check out the advice I give about fixing errors on credit reports in Chapter 9, “Your Credit Report and Score: The Better You Look, the More You Profit.” Bear in mind that not everyone can get approved for a secured card, though. If you still can’t qualify for a secured card, consider applying for a prepaid card—everyone can be approved for one. The fees can be steep, but for some people, prepaid cards are the only option. Although prepaid cards generally don’t help you establish or build credit, they can come in handy when you have no alternatives. (Go to CardRatings.com/Book for the only prepaid card that I know of that allows you to build credit.)

Here are my top tips for using a secured card to build or rebuild credit:

Although there’s no hard and fast rule, using a secured card responsibly can help you rebuild or establish credit much quicker than you might anticipate. I’ve heard from many cardholders over the years who have qualified for a regular card with decent rates in as little as 12 to 24 months. A good indicator that you’re on the right track is an increase in solicitations by mail for cards with rates around or a little above the national average. (Visit CardRatings.com/Book for the current average rates.)

It’s a good idea, though, not to be in too much of a hurry and instead to focus on developing a good credit record. Using a secured card responsibly should help you learn healthy habits. Then when you do get an unsecured card, you’ll remain in control of your spending and credit.

Like many, Gina Baker used her personal cards in the early days of her business, which she has been running for more than five years. As her business grew, and continues to grow, she finds her needs changing.

“It was becoming hard to gauge how much money I was making while using my own credit cards and cash,” Baker explains on the CreditBoards forum. “I needed to separate my business and personal cash flow.”

Having a card in your business’s name offers many distinct advantages, including the following:

“The perks are great,” Baker says. “With a business card, you get discounts on business purchases from wholesalers and retailers who wouldn’t give a second glance to a personal card.”

Business cards offer many other benefits as well: travel accident insurance, collision coverage on rental cars, free or inexpensive additional cards for employees, the ability to set individual credit lines for each employee who has a card, detailed financial transaction reports, and so on.

American Express, which markets its cards under the name “OPEN for Business—Small Business,” offers many business cards designed to appeal to small business owners. For example, all OPEN cards come with automatic discounts at FedEx, Delta, Courtyard by Marriott, Hertz, Yahoo! Search Marketing and Small Business, Logoworks, 1-800-Flowers.com, and more. All OPEN cards allow you to customize online expense reporting, create account alerts, add employee cards, and download data to your in-house accounting system.

Advanta Bank Corp., another popular business card issuer, mainly focuses on the small business market and often has great deals. For example, as of the printing of this book, its no-fee Platinum Business Card with Rewards offers a 0% rate on balance transfers for 15 months (transfer fee applies), followed by a 7.99% fixed rate. In addition, this card offers up to 5% cash back or travel rewards with no limit on your total rewards. Advanta also enables business owners to truly personalize their cards by putting their company name and logo on the card. I really like this feature—suddenly your card can become a unique marketing tool!

This is just a sampling of the cards available to you and your business. Given how keen the competition is among lenders, I expect to see many more small business cards in the next few years. For the latest deals that might appeal to you, visit the Business section of CardRatings.com.

Getting a business card based purely on the credit of your business is very difficult. According to Gerri Detweiler, co-founder of Business Credit Success and president of Ultimate Credit Solutions Inc., unless the business has been incorporated for at least two years, has about 25 employees, and brings in around $2 million a year, a business credit card usually has to be personally guaranteed. In other words, the issuer bases its credit decision largely on your personal credit history...as it takes time to build a credit history for your business.

Gina Baker built her business credit from the ground up. She started small by applying for a card from Office Max with a $250 limit. She also obtained lines of credit from Federal Express and Staples. Although some of these cards required a personal guarantee to prove her creditworthiness, Baker established credit for her business fairly quickly. With good credit management, she noticed offers coming in from larger lenders within six months, with some offering credit limits of $10,000.

The small business card market has really exploded in the last few years. In fact, as Sastry Rachakonda, director of Discover’s Business Card division, recently wrote to me, “Lenders have good reason to be interested in this market, as small business owners make an estimated $250 billion in purchases on business cards on an annual basis.”

Small business spending has been growing at a very healthy clip. Even better from a lender’s point of view is this consideration: “The charge volume associated with a typical business card account is generally three to four times higher than that of a consumer card account,” Sastry explains.

Discover is a fairly new entrant into the business card market. Its Discover Business Card and Discover Business Miles Card both offer fee-free PurchaseChecks, a very unique offering that allows cardholders to pay merchants or suppliers who don’t take credit cards. Cardholders also earn rewards with PurchaseChecks and get the same standard APR and payment grace period as they would with regular card purchases.

One outgrowth of the strong interest in this market is increasingly aggressive business rebate offers. Although rebates on business cards often parallel rebates on consumer cards, business rebates tend to be a little more generous when it comes to cash-back rewards, travel rewards, and so on. For example, the business card of choice in my wallet is a cash-back card from American Express that gives me 2% on all purchases above $10,000 annually with no earnings cap. I don’t know of any consumer cards that offer this level of rebate on all purchases.

To put things in perspective, if your business charges $100,000 a year, a 2% rebate would represent a year-end cash-back bonus of around $2,000. Not a bad deal just for using a particular card!

Although most small-to-medium businesses have traditionally used airline reward cards, I personally prefer cash-back cards, for basically the same reasons I prefer consumer cash-back cards over consumer airline reward cards. Granted, a business airline reward card makes sense in a few instances, but I encourage you to carefully compare rewards, as we did in Chapter 2, “Show Me the Money! Credit Card Rebates.”

Also, it’s worth noting that some business reward cards offer greater rebates in certain expense categories. To maximize your profits, find the business card that most caters to your spending habits.

Choose your business card based on these criteria:

As always, comparison shopping is a good idea. Perusing the ratings, reviews, and applications for business credit cards on CardRatings.com will help simplify this process.

The store clerk says that if you open a line of credit today, you can get one year of free financing on the new appliances you just purchased. “Well then, sign me up!” you exclaim.

You know to make sure you pay off the “buy now, pay later” deal before “later” comes around. But what you might not know is that opening multiple credit accounts will negatively affect your credit rating. And if you’re not careful, you might find yourself opening several lines of credit within a relatively short time frame.

Aside from all the appealing sales pitches, applying for multiple accounts can be particularly problematic if you use store cards only once or twice just to take advantage of the instant rebates. You can soon forget that you ever had them in the first place, but your credit report won’t forget. (More on this in the next chapter.)

“Limit yourself to applying for only one or two cards during any 12-month period,” Gerri Detweiler recommends. “Any more is typically considered a risk factor on your credit report.” On top of that, having several open accounts can be a source of temptation and can result in too many overindulgent shopping sprees!

Now that you know the pros and cons of store cards, how do you figure out if one is worth its weight in gold—or in store credits, in this case? As you might expect, you need to do a little math.

Let’s say you come across an offer at the mall for a card with no annual fee that has a six-month promotional APR of 0% on purchases of more than $500 and an ongoing purchase APR of 22%. The perks include 10% off your first in-store purchase, as well as 10% off your first online purchase. You also get free shipping on all online purchases of more than $100. On top of that, for every dollar you spend in the store, you earn one point. When you earn 1,000 points, you automatically receive a $10 gift certificate in the mail.

Although that’s a very nice set of incentives, ask yourself this question: Will you have to spend more than you normally would to earn the perks or take advantage of the promotional pricing? If so, that’s extra spending you’re putting on a card just to get some discounted merchandise, which won’t be discounted for long. When that teaser rate is over, the interest rate will balloon to 22% and your debt could mushroom quickly if you’re not careful.

But if you...

...then you can fully enjoy the perks, knowing that you earned them “free and clear.”

With so many great offers out there, it really pays to take the time to think through the benefits of a particular store card before you sign up for it. I know performing math is a lot to ask when you’re at the checkout counter with an armload of new purchases. But never sign on for a card without reviewing the fine print and finding out exactly what you’ll get. It might take away some of the fun of a shopping splurge, but in the long run, you’ll be happier if you slow down a bit and safeguard your credit.

Ask the clerk to hold your items, take the application, and find a place where you can sit down and read it. You should find the Schumer Box and the other terms and conditions right there. While you’re at it, take a minute to think about what you were going to buy. Then consider this money-saving thought: That hip outfit from The Gap won’t likely be so hip in a few months anyway!

For current store card offers, visit the “Card Reports” section of CardRatings.com. See what cardholders are saying about their store cards in the “Consumer Reviews” section, and feel free to post your review there as well.

Remember the airline reward cards we discussed earlier? They’re a perfect example of an affinity (aka cobranded) card, which brings together two organizations for their mutual benefit. One is the card issuer, and the other is usually a nonfinancial group, such as an airline.

Sometimes the nonfinancial group is a nonprofit. I want to focus on this segment of the affinity cards market because I think it deserves your special consideration.

Affinity cards offer you the possibility of an expanded relationship with your favorite charity. All you have to do is use the card to make everyday purchases, and the nonprofit receives small donations from the card issuer. That’s right, you can support the cause with no out-of-pocket cost, just by using its affinity card on your weekly run to the grocery store. What used to be a chore is now a charitable donation benefiting your favorite nonprofit!

For example, the Humane Society of the United States (HSUS), which started its affinity card program through Bank of America more than 12 years ago, has 60,000 open accounts and consistently receives “well into six figures each year,” according to Steve Putnam, HSUS vice president of Business Development and Corporate Relations.

HSUS depends on the affinity card to support many programs, he says, including efforts to strengthen animal cruelty laws, resolve conflict with wildlife, protect wildlife habitat, offer humane education programs in schools, spay and neuter dogs and cats, promote shelter adoptions, and provide disaster relief for animals.

The variety of affinity cards is incredible. Whatever your interests, chances are there’s a card for you. Would you like to support your child’s education? Check out the Target affinity card, which donates to a local school of your choice.

Want to help less fortunate and homeless people? Love Elvis? With the Elvis Presley Visa Card, offered through Bank of America, a portion of every purchase is donated to the Elvis Presley Charitable Foundation, which provides homeless families up to one year of rent-free housing.

Alumni organizations, professional associations, and children’s causes, such as the St. Jude Children’s Research Hospital, are just a few more of the many nonprofits you can help. To compare affinity card offers, visit the “Rewards Card” section of CardRatings.com.

Although your interest in supporting a nonprofit organization should determine whether you use a particular affinity card, it pays to understand a few possible catches:

I really like tax deductions, so I personally favor standard cash-back cards over affinity cards. But affinity cards offer definite benefits, not the least of which is the convenience factor: The whole donation process is on autopilot. Thus, these cards have a “forced savings” component.

Be as objective as possible when you consider affinity cards. The bottom line is that you should make sure it’s a good deal, both for your favorite deserving cause...and for you.

By reputation, the most well-known prestige card has been the American Express Centurion, popularly known as the Black Card. Introduced in 1999 and available by invitation only, Black is reportedly only for people who charge at least $250,000 a year.

Other undisclosed eligibility requirements exist as well, but the card is so exclusive that it’s hard to get reliable information about it! Here’s what is clear: Centurion has a $5,000 initiation fee...plus an annual fee of $2,500! Stories about the rich and famous who use Centurion abound.

“The Centurion Card is built for a very discerning, high-wealth individual who enjoys travel and the best life has to offer,” explains Desiree Fish, vice president of Public Affairs for American Express. “The perks of the Card cater to their needs and lifestyle.”

Although the price tag is very steep, the perks could well be worth the fee—if you live a certain lifestyle. According to various blogs, Centurion card members seem to be frequent travelers, and the card caters to their needs, offering bigger and better frequent flyer rewards, perks, and upgrades at hotels. Often discussed are complimentary companion airline tickets on certain international flights with the purchase of a full-fare ticket.

If the price tag and eligibility requirements of Black seem out of reach to you, don’t despair. (You’re not alone, trust me!) Several other elite-type offerings have more palatable fees and requirements. The Diners Club Carte Blanche Card, for example, has an annual fee of “only” $300 and offers many high-end benefits:

If $300 is still out of your price range, consider Visa Signature Cards and World MasterCards. They have a lot of enhanced benefits, many at no additional cost, and are targeted to middle-income Americans (usually, but not exclusively, upper-middle-income). Surprised? Don’t be. Remember, card issuers are in fierce competition, and they want business so badly they are willing to dangle bigger and better carrots in front of us.

Some of the perks these cards come with include hotel discounts and upgrades, no preset spending limits, rebates on travel, extra travel insurance, 24/7 concierge service, VIP reservations at expensive restaurants, special discounts at stores and spas, early ticket purchasing for concerts and sporting events, flexible, generous rewards, and more.

Sound enticing? The good news is that you might already have a card issued by a bank that would happily give you Visa Signature or World MasterCard privileges—assuming your credit is good to excellent. The offers change frequently, but it’s quite likely that you can find a card with no annual fee or a low one (up to around $85), and as reasonable an interest rate as you’d get on any other reward card. I personally got an offer from Citibank recently to upgrade my platinum account to a World MasterCard that included many enhanced benefits. The offer was free, so I gladly accepted!

Go to CardRatings.com/Book to take a gander at the current crop of freebies that these elite cards offer.

Although these cards have a lot of attractive features, these same features can do more harm than good. If you decide to pursue an elite card, be sure to not let the lure of the extra benefits tempt you into charging more than you can afford.

Also be sure that any extra fees are a good investment of your hard-earned money. If you pay $300 a year for the coolest perk on the planet but never actually take advantage of that perk, you’re just wasting money.

For the opinions of actual cardholders, check out the “Consumer Reviews” section of CardRatings.com. You’ll find several reviews on elite cards, which can help you choose the one you’d like to have in your wallet. Even if you don’t qualify, it certainly doesn’t hurt to dream!