Don’t let the fact that you are using your money as backing fool you. Unlike a debit card or prepaid card, when you swipe your credit card the money you've set aside isn't touched, unless you default. You still make monthly payments with a secured card. More importantly, your spending and payment activities will be reported to the credit bureaus. Not paying your bill on time – or at all – will hurt your credit just like a regular card. By contrast, the spending activity on your debit and prepaid cards are not reported to the credit bureaus.
But you have to be careful. Not all lenders report payment activities on secured credit cards to the three major credit bureaus. Credit unions, for example, are less likely to report than major banks. So when applying for a secured credit card, it is important to check the terms and conditions to be sure the prospective lender reports to the credit bureaus.
