Dear Dr. Don,
I am interested in applying for a secured credit card to rebuild my credit history. Are there any secured credit cards that will allow me to deposit money periodically to build the credit limit, as opposed to a one-time deposit amount?
In other words, if I deposit $1,000, can I later increase my credit limit by adding to the deposit?
— Tony Tempering
Dear Tony, A secured credit card is a good way to rebuild your credit history. You put money on deposit with the card provider and the deposit becomes your credit limit.
The secured card is used like a regular credit card, including paying interest on any outstanding balances. Having the payment history reported to the credit bureaus helps rebuild your credit.
Be cautious in opening a secured credit card account. Some card providers front-load fees and expenses. I looked at one card where an initial $250 deposit would result in less than $75 of available credit after fees and expenses.
You can shop for a secured card using Bankrate’s credit card search feature and selecting “cards for bad credit.” Stay away from prepaid or debit cards. You want a secured card.
Adding money to the collateral account increases the credit line available on these credit cards. This feature should be common to all secured credit card providers.
Confirm with the card provider that this feature is available before applying to open the secured account.