Secured Credit Card

A secured credit card is a type of credit card for which the line of credit is secured by a deposit held as collateral by the card issuer.

When an individual applies for a secured credit card, they are required to deposit money into a blocked account. The card issuer then extends a line of credit equal to the deposit.

Example: You apply for a secured credit card and put down a 2000 Swiss franc deposit. The card issuer provides you with a line of credit of up to 2000 Swiss francs. You can use the card to pay for purchases up to that limit.

This type of payment card is identical to a regular credit card in its functionality. The only difference is that all card debt is secured by the deposited collateral. If a cardholder fails to make their payments on time, the card issuer uses the deposit to settle the debt.

Secured credit card provide a solution for individuals who are not able to obtain regular credit cards due to poor creditworthiness. They have an advantage over prepaid cards in that cardholders do not pay loading fees and they can be used when credit cards are specifically required (for some car rentals, for example). Secured credit cards are not widely offered in Switzerland, although some issuers provide this option to individuals who reside outside of Switzerland.

More on this topic:
Swiss credit card comparison

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