Identification

• Secured credit cards are credit cards, usually with a low limit, backed by a security deposit the same as or close to the limit on the card. When you spend money, the issuer taps the card's credit, not the deposit. On either a secured or regular card, going over the limit will damage your credit because your credit utilization ratio increases. Credit utilization is the ratio of credit used to the balance available and falls under the "Amounts Owed" category of the FICO score formula, which counts for 30 percent of your credit score.
  
  

Considerations

• Creditors do not report fees and surcharges to the credit reporting agencies, but they report balances over the spending limit. When other lenders pull your credit report, they will see you went over your limit and may consider you too risky to lend to. If you receive credit after going over the limit on your secured card, you may see a higher than normal interest rate.
  
  

Solution

• Going over the limit on a secured card once or twice probably won't raise any red flags with lenders. If you are chronically over the limit, stop making purchases on the card or try to raise your limit, which will require you to increase the size of your deposit.
  
  

Tip

• Ideally, you should only make small purchases on a secured line to rebuild your credit. Secured credit cards often have higher interest rates than normal credit cards, and some secured cards exist only to collect exorbitant fees from people going over the limit or paying late. After a year or so of good payment history, the lender will probably offer an unsecured line.