what is the secured credit card?
why you need a secured credit card?
It is important to remember that secured credit cards are best used to build a good credit score. This means that you should only make small purchases that you can afford to repay. Acquiring a mountain of credit card debt right off is the worst thing you can do. Your spending habits will certainly affect your chances of obtaining an unsecured credit card.
what is the secured credit cards?
Secured Credit Cards are credit cards for people with bad credit or no credit. Compare the options listed below and find the best secured credit cards to rebuild credit or start your credit history while minimizing the fees that you will have to pay. Only secured credit cards that report to the credit bureau are included below. Prior to getting a secured credit card, you need to place a fully refundable security deposit of at least $200. In most cases, you can do so online, over the phone or by mailing a check or money order. This deposit becomes the amount of your credit line and it is returned to you when you close, in good standing, your secured credit card. An important benefit of the security deposit is that it allows most secured credit cards for bad credit to offer you guaranteed approval regardless of your credit history or income. You can build or rebuild your credit history by making your payments on time to all of your creditors and by maintaining your balances under the credit limits.
How does secured credit card work?
you make a deposit with the credit card company. they put in a non interest bearing acct. the amount of your deposit is your credit line amount. they send you a bill like any other credit card. if you dont pay the bill they use your deposits as collateral.
to build credit faster, take out a loan at the bank and put it in a interest bearing acct as collateral, make 2 monthly payments for the first 3 months(total 6 paymants). after 3 months, take the money from the savings acct and pay off the loan. shows good credit and paid off early.
You basically put down a deposit for a credit card so if you default they can take your deposit. If you really want to establish credit this is a good way to start. Once you have established yourself you can then open a regular credit card account and close the secured one.
For Example
When you get a credit card with a $500 limit, for example, you put $500 in an account to secure that card. When you use the card, you must pay it with money from your account, not the $500 security money you put up. If for some reason you do not pay the payments on the card, they will then use your security money. The checks you write are coming from your money, not the banks.
Benefits of a Secured Credit Card?
A secured credit card arrangement can be a good way for someone to build or rebuild their credit history. However, a secured credit card is not unlike a regular, or unsecured, credit card. Like an unsecured credit card, a secured card has annual charges and fees. Further, these charges can often be higher than unsecured credit cards. Many secured credit card offers also require the purchaser to have a bank account, as well as impose age and income requirements. The best secured credit cards will allow the purchaser to eventually convert to an unsecured credit card, after they have established a period of timely payments. Someone who is interested in obtaining a secured credit card should be sure to shop around!
Choose a secured credit card?
The best secured cards have a low interest rate, low annual fee, and report to the major credit bureaus each month. Another good feature, but not necessarily a must-have, is a secured credit card that converts to an unsecured one after a certain amount of time. If you like the bank where you have your savings or checking account, check out their secured credit card. Read our secured credit card reviews to help you narrow down the options.
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