Secured MasterCards
Why would anyone look for secured MasterCards? There are a couple of good reasons...
Reason #1: Bad Credit
Anyone who has bad credit might have trouble getting a regular, unsecured credit card. To understand that, you have to understand the difference between secured and unsecured credit cards. The credit card offers you get in the mail are for unsecured credit cards. These typically give you fairly high limits if your credit is good (outrageously high, sometimes) which can be dangerous. But secured cards like secured MasterCards are cards you pay for upfront, meaning you fill out an application, send in a check for an amount that you want your limit to be and you get your card in the mail. Since you've already sent the money in, you've secured the card. This allows you to only spend what you can afford. And since secured MasterCards are reloadable, you don't have to reapply to get one every time. Plus there's no credit check. And nobody knows whether your card is secured or unsecured.
Reason #2: Financial Management
Some people don't trust themselves not to charge up a high balance on unsecured MasterCards. That's why they choose to get secured MasterCards. With unsecured MasterCards, if you go over your limit, the MasterCard company will usually allow one or two transactions, but you'll get hit with an over-the-limit fee. With secured MasterCards, since you've already paid the money, it's similar to a debit card--when the money runs out, the transaction is simply declined. This is embarrassing, sure, but you avoid fees this way, and you learn how to keep your spending in check. This is a good tool for students, too. Rather than getting an unsecured MasterCard in college and learning about the evils of credit card debt the hard way, a secured MasterCard will teach them good financial management right away. That way, when they get an unsecured card, they'll already have good spending habits in place.
No matter what our credit history looks like now, the fact is that we can take steps to improve it, which will save money in the long run and make other loans more accessible. Children can use their student MasterCards responsibly and will reap the rewards when their credit score is worth something after they graduate.
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