Copyright (c) 2010 John Gough Rasor

If you are the type of person that is afraid to use credit cards because of past debt issues, or maybe you can't even get a card because of those issues, a secured card may be a great alternative that will allow you to enjoy all of the advantages of credit cards without having to worry about your credit card debt getting out of control.

In this day and age, it seems we are conducting more and more transactions over the phone and the internet that require credit card numbers. The reason for this is simple. Literally. Credit cards simplify our lives in many ways. They allow us to save a great deal of time and they are super convenient. Why bother leaving the comfort of your home when you can shop, view and compare products online?

But many people have reservations about using these cards for many reasons. Many have gotten themselves into trouble in the past with high interest debt or they can't get approved for a card because of past credit issues. A secured card solves both of these problems! Secured credit cards are available to almost anyone regardless of past issues. And since the credit limit on a secured card is limited to the amount of security deposit that you are willing to put up as collateral, there's no need to worry about balances getting out of control. And the interest rates on secured cards are often more competitive than unsecured cards for the simple reason that the bank is much less likely to lose any money since the card is "secured" with a cash deposit.

Aside from the convenience aspect, credit cards provide a higher level of consumer protection than any other form of payment, even debit cards. Think about it. If someone steals your debit card, that's money that comes directly out of your checking account whereas a credit card is not tied to living expenses. There's no risk of bouncing checks or being short on cash. Most banks will also not extend the same level of protection to consumers for transactions made on their debit card. For example, I recently had a dispute with an internet merchant who overcharged me for a service. Unfortunately, I charged this on my debit card, which meant I was left to fend for myself against the merchant. If I had charged this on my card, the card issuer would have removed the charge and helped me dispute this with the merchant. I got lucky and was able to get my money back, but it took almost six months. I learned the hard way that using your debit card for internet purchases can pose many problems. Credit Cards offer a level of protection higher than any other form of payment.

Learning how to use cards for their benefits without falling into the trap of compound interest is the tricky though, and many people do not have the financial self-discipline to do that. The smart way to use credit is to pay the full balance every month whenever you can. A good rule to live by with charge cards is only charge what you can afford to pay at the end of the month.

Keeping active accounts on your credit report is crucial to maintain a good score. Many consumers who have run up lots of debt in the past cancel all of their credit cards in an effort to "rid themselves" of the temptation to get back into financial trouble. While this can be a good strategy, canceling cards can drastically lower your credit score since a significant portion of the score is determined by active accounts and the length of time accounts have been established. Simply canceling all your cards can be a mistake that can result in a lower credit rating. It's better to keep some accounts open and ask the creditor to lower the credit limit if that's a problem.

Secured credit cards are the best way to maintain a good credit rating and enjoy the various benefits of having a credit card while still maintaining responsible spending habits.