Secured Credit Cards

What are Secured Credit Cards?

Secured credit cards are a type of credit card offered by a credit company or bank against Secured Credit Cardsa cash deposit or collateral. Most standard credit cards require individuals to have a credit score that stands above average, but in this case you can get a credit card even when you have no credit completely or, if you have a poor credit history. This type of credit card requires its holders to make a deposit against its credit limit. The collateral deposit becomes the credit line for your account.

How secured credit cards work

Most banks keep your cash deposit in a saving account that bears interest up until when you decide to close the account, rise to a credit card that is not secured or if you default on your credit card payments. This card usually has a credit limit of between fifty and a hundred percent of the cash deposit. Secured credit cards can be used just like other ordinary cards to make purchases or pay bills.Credits cards held against a cash collateral deposit feature initial costs or up-front fees. What that means is that the card has a balance even before you buy anything with it. Some of these costs may include an application or set-up fee program fees, an annual fee and participation gees. Some cards also have a monthly maintenance fee. Since these costs minimize your available credit balance, it is important for you to shop around and apply for one that has minimum fees. Most card issuers will not use you deposit unless you fail to make payments. Some may use it cover a late payment. A good company is one that will allow you to upgrade to a card that is not secured after they have confirmed that you make timely payments and that you are responsible. You may obtain card with security from a company that will not allow you to change to a regular card but, so long as you make your payment on time you can get one from another company after 6-12 months. Read more here.

Advantages of secured credit card

• One of the major benefits of secured credit cards is the fact that you can be approved to get one when you can not be approved to get a regular one.
• These card issuers also report your payments to the 3 credit bureaus for inclusion on your credit report. With this card it is possible for you to either establish or repair a poor credit history. Because if payments are indicated on your credit report, it would do a lot of good to your credit score.
• If you make your payments on time every month, it becomes possible for you to obtain an unsecured credit card with lower interest rates later on.
• Unless you exceed your deposit, you will not be sent to collection agencies if you are unable to make your payments. Even though the bank or credit union that has issued the credit retains your deposit, you do not have to worry about debt collectors being after you because of missed payments.
• In some cases, holders of these cards earn some money if their deposit is placed in a interest earning account and the interest rates are not high.

Limitations of secured credit cards

• These cards may have high interest rates than standard credit cards which end up costing more in finance charges. To avoid steep finance charges, it is advisable to settle your balance fully every month.
• Some cards do not report to the major reporting agencies and so your credit standing may remain as poor as it was initially.
• Some card issuers report that the account is secured to credit bureaus. This notation or flagging can work to your disadvantage if you are trying to fix your credit or when you are trying to obtain financing from lenders in future. This is because the other creditors might not have much confidence in you because you had financial difficulty in the past.
• You must pay the cash collateral first. This might be challenging to obtain especially if you are struggling with your finances. If you can not be able to raise the deposit, you are better off paying some of the outstanding debts that you have.
• You can not spend as much as you wish because your line of credit is limited by how much you have put down as deposit.

Category: Secured credit cards

One comment on “Secured Credit Cards

  1. Pingback: Credit Cards to Rebuild Credit « Joint Credit Cards Joint Credit Cards

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