Not understanding secured cards...

[compassion101]

Also. I imagine if you default there is quite a few man-hours that need to go into filing forms and making contacts before they can consider your account in default and claim the collateral (your security amount).

I'm sure if they take many people who fit a profile for possible default, but possibly if they consider someone highly likely to default it may not be worth it to them.

[bigblue7722]

Its not always about the risk with a secured card. It is also about the time and money spent creating a card, spending out statements, having more customer service due to more customers calling in. Everytime we chat with someone at cap one or call in its free to us yes but for cap one it cost them money. Cap one wants to build a relationship with you. So having someone with a really bad score and tons of baddies is not always worth it to them. If for example you give them your 200 bucks and burn them in 4 months they keep your 200 u might have ended up costing them money or they barely break even with the 29 annual fee. So many people have or try to get secured cards that they can be selective. 

[takeshi74]

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@lionsfan20 wrote:

how could the company ever go wrong by accepting everyone..they get your money..

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In addition to the comments above, keep in mind that not all secured cards have limits that equal the deposits.  There are secured cards that have limits greater than the deposits.

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@lionsfan20 wrote:

but that makes no sense..there not granting a credit line at all..your granting your own credit line..its your money to spend..not theirs. The only thing I see them doing is positive reporting but with charging rediculous fees and you using your own money..they really shouldnt check credit and not just that but then have the lack of decency to deny people.

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It is a credit line.  If credit is not extended then it cannot be a secured credit card by definition and one cannot use it to build credit.  You seem to be assuming that a secured credit card is a debit card (what you're describing).  They're two very different things despite some similarities.  Extending credit isn't based on deceny.  It's based on risk analysis.  Creditors are businesses, not charities.

Additionally, credit is, by definition, someone else's money.  You're confusing the credit line with the collateral.  While in many cases the amounts may be the same they are not the same thing.

[Startome]

Honestly guys, I feel like the OP's original question is yet to be answered in full, though has been partially answered several times.

The reason they pull your credit, is to check for bankruptcies mostly. Charge offs and tax liens are included, among other baddies. As those are a sign that people have let their account get far under, and typically way past limits, before they would have a chance to collect collateral, which would amount to only partly what is owed. They still take a loss here, as well as in what they pay their employees to do the work as another poster mentioned previously.

Capital One is one of the biggest decliners for secured cards because theirs are typically only partially secured. They are very special and useful in this way, but also at higher risk to their company. They accept 50 dollars as secured, but grant a 200 dollar credit line, so they loose even more if a person defaults. This is why they are so strict with their secured cards.

So ultimately, they are trusting you not to cost them money. They would loose less on you than an unsecured client, but they still loose some. This is why secured cards even build credit at all, because you're still proving yourself capable of respecting a lender.

[money_talks]

OP's question is a question that is asked lots of times. To add to some of the answers already posted, I'll add what I've learned from other threads as to possibe good reasons for running your credit and possibly being denied.

http://ficoforums.myfico.com/t5/Credit-Cards/Can-you-get-denied-for-a-secured-card/td-p/1776486

HiLine wrote:

Also, I think especially for secured cards that typically would graduate, creditors also evaluate the potential customer with a long term vision: is this consumer going to use our credit cards in years to come? Is he going to be able to handle our non-secured cards after one year? If the creditor does not believe the credit applicant to be able to manage credit well in the relatively near future, it makes sense that the creditor wouldn't want to take him as a customer. 

Revelate wrote:

Actually there are certain issues on one's credit report (open/unpaid judgements being one such example) where some other entity can legally snatch the deposit.  Suddenly they're left holding the bag on a risky customer with no deposit if that occurs, and rather than tempt fate (since it costs them money to have anyone as a customer) they will often simply deny it outright, though there are lenders who are more conservative than others to be sure.

*Mods: We probably need a sticky for this question!

[09Lexie]

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@money_talks wrote:

OP's question is a question that is asked lots of times. To add to some of the answers already posted, I'll add what I've learned from other threads as to possibe good reasons for running your credit and possibly being denied.

http://ficoforums.myfico.com/t5/Credit-Cards/Can-you-get-denied-for-a-secured-card/td-p/1776486

@HiLine wrote:

Also, I think especially for secured cards that typically would graduate, creditors also evaluate the potential customer with a long term vision: is this consumer going to use our credit cards in years to come? Is he going to be able to handle our non-secured cards after one year? If the creditor does not believe the credit applicant to be able to manage credit well in the relatively near future, it makes sense that the creditor wouldn't want to take him as a customer. 

@Revelate wrote:

Actually there are certain issues on one's credit report (open/unpaid judgements being one such example) where some other entity can legally snatch the deposit.  Suddenly they're left holding the bag on a risky customer with no deposit if that occurs, and rather than tempt fate (since it costs them money to have anyone as a customer) they will often simply deny it outright, though there are lenders who are more conservative than others to be sure.

*Mods: We probably need a sticky for this question!

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Reoccuring topics are reviewed for stickys.  Space is limited, therefore we have to limit topics. As the demand for threads and volume changes- new topics will be added.   

Thank you ~Lexie