WATERLOO - Some people may see credit cards as a tool with which people can spend money they don't have. A few cardholders, however, use their cards to access money they have already deposited into a bank account.

Secured credit cards can help people who have little credit history build their credit rating or assist people with bad credit rebuild their score.

Activating a secured credit card requires a deposit of money that is used as security against the card. For example, if someone deposits $500, that $500 becomes the credit card limit. The $500 deposit is set aside in a separate account as security against the card and is off limits for withdrawal without first closing the credit card account.

Secured credit cards work like credit cards and, unlike debit cards, most card issuers report card activity to the three major credit bureaus that track credit scores.

Veridian Credit Union is one of a few local institutions offering secured credit cards. Cards are available for members who apply for loans or credit cards but may not qualify. The card isn't advertised and only about 150 members have secured credit cards, said Eric Kinman, Veridian spokesman.

Kinman said getting an exact count of secured credit card holders is difficult because they aren't tracked any differently than other Veridian-issued credit cards.

The cards' interest rates vary from 5.9 to 18 percent annual percentage rate.

"There are so many things you need a credit card for these days," said Kara VanWert, Veridian consumer lending manager. "We're giving them this option instead of saying 'no.'"

VanWert said she has seen additional interest in secure credit cards from college students who are looking for a way to establish credit or parents who put down the deposit and give the card to their children. Part of that interest may be a result of new federal legislation that requires people under 21 years of age have a co-signer to get a credit card.

"You know there's a limit, and they can't extend it and spend more and more," said Kent Baldwin, a credit counselor with Consumer Credit Services.

Secured credit cards can be a good tool to build up a positive payment history, Baldwin added. However, like regular credit cards, they can still be used by predatory lenders. Some cards come with annual fees and might not report activity to all three major credit tracking agencies. Some come with high interest rates.

Kinman said the secure cards come without annual fees.

"We have no interest in somebody being poorer or worse off than they were before the loan," he said.

The secure deposit is treated as a savings account and earns interest. If the cardholder pays off the balance of the card every month, they pay no interest charges on the credit card, he said. Certificates of deposit also can be held as the deposit on such cards, Kinman said. Although the money isn't directly available, the member still has the same spending power but never empties their savings.

"I don't think it's ever a wise idea to be without money in a savings account," he said.