If you have little to no credit, may have a hard time doing the simple things in life. Renting a home, making major purchases, and paying for emergency expenses can become difficult without credit to rely on. Some businesses will check your credit file before hiring someone, to get a little snapshot of the responsible nature of the applicant.

The downside to having no credit is that it’s difficult to get credit card companies to offer you a credit line. A good solution to this is a secured credit card. Pay as you go credit cards are secured with your own funds, and therefore many creditors will extend a card to those who may be cash rich, but credit poor.

You Are Spending Your Own Money

With a pay as you go credit card, you are essentially using your own disposable income. It’s like having a second checking account. The credit card is secured with your own funds, so everything that is “charged” is paid for as you go. This benefits both you and the credit card company. You are sure not to spend or charge more than you can truly afford, avoiding the possibility that you may not be able to pay it back. The creditor also assumes less risk, because they have your other banking information to secure payment.

Establishing a Credit History Without the Risk

One of the great things about a pay as you go credit card is that you are still working on building a positive credit history. Even though your card may be secured, the account is still registered with all three major credit bureaus and a tracking of the payment and balance information is kept. This way, if you apply for more credit in the future, you’ll have at least one positive account on record to show you are responsible with your payments. Since you are paying as you go, there should be no delinquencies on the account.

Unlimited Credit Limit

With secured credit cards, usually the amount of your credit limit is only restricted to the amount of money you use as security. With a pay as you go credit card, you can essentially make unlimited amounts of money available for spending. However, if you have access to such amounts of money, you may not even find a need for a credit card. If you are cash rich, but credit poor — meaning you have little to no credit history — getting a secured card like this will help build up your credit.

Ability to Switch to Traditional Terms

The great thing about secured credit cards is that if you maintain a great payment history, the creditor will often switch you over to an unsecured card. It may take up to a few years of “charging” and paying faithfully, but many credit card companies will reward debtors by offering them a real chance to prove their credit worthiness. This will free up your cash. The creditor is hoping that after a long period of making payments on time, that the trend will continue once your card is no longer secured with outside funds.

With a secured credit card, you can build you credit and open up opportunities for future credit accounts. If you are having trouble securing lines of credit but have money in the bank, consider using a card that you can pay on as you go. These cards are often easier to acquire, and after a time period of satisfactory payments, the creditor will often offer an unsecured card for your use.