My Company Is Switching Us to Secured Credit Cards – Is This Truly Beneficial or Too Good to Be True?

A lot of people get paid with a check that’s either handed to them or that goes into their bank account directly each month. But in this Reddit post, we have a more unique situation.

The poster works in the service industry and earns much of their income from tips. What’s been happening is that tips are put onto a debit card for them to access, but the company is making a change.

Instead of putting tips onto a debit card, going forward, the company wants to put them onto a secured credit card. And that has the poster worried.

Their parents wound up deep in credit card debt, and they don’t want to end up in a similar situation. So they’re wary about using this new system.

I can see why the poster feels this way. And they should also know that secured credit cards aren’t like traditional credit cards. But they should also know that this is an odd way to get paid.

How secured credit cards work

A secured credit card isn’t like a regular credit card. With a regular credit card, you apply and get a line of credit that’s based on factors like your income and credit score. From there, if you use more of your line of credit than what you can afford to pay off, you risk landing in debt.

With a secured credit card, your credit limit is based on funds that are linked to your account. Put another way, a secured credit card is a credit builder sort of card, and you’re only spending money you already have.

Here’s how it might work. You might open a secured credit card with a $500 deposit. That means your credit limit is $500, and you can’t go beyond it. Because of this, you can’t get into debt. Once you’ve exceeded your limit based on available funds, you can’t charge more expenses.

If you’re wondering what the point of a secured credit card is, it’s to simply build credit. When you make regular payments on a secured credit card, it gets added to your payment history.

A lot of people use secured credit cards to build up a credit history when they don’t have one already. So it’s not an unusual thing. But what is unusual is an employer forcing its employees to get paid via secured credit card, so that’s something to look into.

A strange payment method

The poster here doesn’t necessarily have to worry about a secured credit card landing them in debt. But they do have every right to question this new payment method.

There can be fees associated with a secured credit card, and it’s not exactly a conventional way for a business to pay its employees. So the poster here should talk to their manager, or whoever’s in charge of the decision, and try to better understand the logic behind it. And if they’re not comfortable getting paid via a secured credit card, they should say so.

A secured credit card could make it harder for the poster to move funds they’re earning into their own bank account. So they should understand the potential drawbacks and also try to find out if getting paid this way is legal in their state. They could try to find a pro bono employment lawyer who’s willing to answer the question.

All told, the poster needs to get more answers. And they should know that while secured credit cards aren’t a bad thing overall, in this situation, they’re a strange thing. And that should be enough to raise a red flag, and perhaps lead them to explore other employment opportunities.