A secured credit card is a credit card with a credit line that is linked to a security deposit in an interest-bearing savings account.

Secured credit cards look and work just like any credit card when used at stores, restaurants, and even hotels.

Anybody can obtain a secured credit card and setting it up is easy.

Upon approval, you send the credit card company a deposit (usually between $300 to $5,000) which is used to open a savings account. The company then issues your credit card.

In most cases, your credit line will be equal to your deposit.

As you charge things on your credit card, your savings account is not touched, and the money in it earns interest.

At the end of the month, you pay a secured credit card as usual, choosing between a minimum payment, the full balance, or a part in between.

Secured credit cards are similar to debit cards and pre-paid credit cards but have one important advantage. You can use secured credit cards to reserve hotel rooms, rental cars, and other items. Making reservations is impossible with pre-paid credit cards and often difficult with debit cards.

The only time anything would happen to your security deposit is if you fail to repay your secured credit card, in which case the bank will use your deposit to cover the charges.

With most secured credit cards, after one or two years of responsible card use, the company may extend an offer of unsecured credit.