is one of those ubiquitous inventions of the
modern age that refuses to quit. In fact, it has made itself so
necessary in our lives that we need one to rent a car, book a
hotel room or just to buy a comicbook online. More than that,
credit cards are one of the ways creditors take a peek at our
credit history with and they can actually make or break our
chances for a good loan, an apartment or a job. So what do we
do if we’ve torn our credit to pieces? We turn to secured
credit cards.
Secured credit cards are a great substitute for regular credit
cards. Whether you have poor credit badly needing repair, can’t
get a credit card or are new to the credit scene, a secured
credit card can help you re-build or establish your credit.
How does it work?
A secured credit card is a cross between a credit card and a
debit card. It requires collateral in the form of cash
deposited in an account. That amount then functions as your
credit line. So if you deposited $700 in your account, you can
use your secured credit card to purchase items up to $700,
nothing more. The catch is, you have to pay it back.
Some banks offer to give you more credit as a reward for being
a good client (i.e., you pay your bills on time) or maybe allow
you to charge up to a certain percentage more than your deposit
amount. You only need to pay a small interest rate to cover for
that type of usage.
What’s the minimum deposit amount?
Depending on the type of card you chose or on the banking
institution, most secured credit cards will require a deposit
starting at $300. There is no limit to how much you want to add
later on.
What to look for in a secured credit card
Compared to unsecured cards, secured credit cards require
annual fees and come with higher rates. If you’re shopping
around for a secured card, make sure to get one that has no
application fee. You will have to pay an annual fee so choose a
secured card that does not ask for a prohibitively high charge.
Watch out for secured credit card agreements that hide fees or
ridiculous add-ons that you don’t really need. An example is
one where a credit card company will approve your secured card
application provided you sign up for a monthly insurance policy
that costs $50.
Where can I apply for a secured credit card?
Not all banks offer secured credit cards but you can still
check out your local banking institutions if it’s still part of
their product line. You can also check with your credit unions
since many of them offer these cards to members only.
Using secured credit cards to build credit
While most banks target clients who have never had credit
before as the main users for secured credit cards, many
consumers use secured credit cards to help re-establish their
credit. To do this, consumers need only to use their secured
cards and ensure that the bill gets paid each month. By
establishing their reliability, the consumer establishes
positive credit.
The future of secured credit cards
Secured credit cards are still the choice of many card holders,
but many are giving up their secured cards in exchange for
unsecured cards. Unsecured cards don’t require cash collateral,
which accounts in part for their attractiveness. A secured
credit card is still a great choice, especially for people who
are still building credit or for those who are trying to
rebuild theirs.
About The Author: Mario Churchill is a freelance author and has
written over 200 articles on various subjects. For more
information checkout http://www.i-want-a-credit-card.com and
http://www.creditcardcorridor.info.
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