Credit cards have been part of many people’s lives. You can use it to purchase items, pay bills, (i.e. phone bills, utility bills, etc.) make airline or hotel reservations or even to rent a car. In addition to this, credit cards are great for people who want to establish credit history.
However, people with low or bad credit scores find it difficult to qualify for a traditional credit card. The next best option for them is to apply for secured credit cards.
FAQs about Secured Credit Cards
What is a Secured Credit Card? A secured credit card is like a traditional credit card except for one thing – a person applying for this type of credit card is required to deposit a certain amount of cash that will serve as guarantee for debts. The deposit will also determine the cardholder’s credit line.
If the cardholder can show an impressive performance for at least 6 consecutive months, the secured card issuer may raise his/her credit line without requiring for additional deposit.
Where can I get one? Check out websites of different credit card companies offering secured credit cards. Most issuers offer free online application. You can also compare the rate of interest and fees online. Another way is to consult your bank.
How much money do I have to deposit? This will actually depend on the credit card issuer. Some issuers require a minimum of $300 while others may require at least $500 for deposit.
What are the other charges or fees I have to pay? You will need to pay an annual fee to keep your account open. Secured credit cards often come with higher fees and interest rates. It is highly recommended to do your own research, shop for possible options and compare.
What are the things I should consider when choosing a Secured Credit Card? First, you have to check the interest rate and fees. Look-out for hidden charges. Second, read and understand the fine print before signing up.
Third, you should always make sure that the credit line you choose fits your budget or income. The last thing you should check is if the credit card issuer you chose reports to all three (3) major credit bureaus. If you are trying to improve your credit score, it is important to make sure that every single payment you make, is well-accounted for.
Are there problems I should be aware of? Using a secured credit card has its advantages and disadvantages.
1.Anyone can apply even people with bad credit.
2.Great way to rebuild a bad credit history.
Since most people who apply for secured credit cards are individuals with bad credit:
You may be required to pay an upfront fee what they call receiving “guaranteed” credit cards.
The interest rates and penalties are higher than unsecured credit cards.
How long will it take before I can qualify for an unsecured credit card? The average time is about a year. This will, again, depend on the issuer.
How To Use Your Secured Credit Cards to Your Advantage
It is a must to always use your credit card wisely. This type of freedom is sometimes abused. Some credit cardholders purchase items that are not really needed. Although a secured credit card prevents you for spending more than your credit line, maximizing your credit limit is discouraged.
Be sure to pay your monthly bills on time to prevent penalty fees. Since you are aiming to rebuild your credit history, you need to alert about your payment habits.
About the Author
Tara Tiemann is a credit analyst for Go-prepaid.com which has been a resource site for people who want to live debt free. If you are on a budget using prepaid debit cards,prepaid credit cards and prepaid cell phone service can save you big money!