Major problems in life affect the credit records of people. A recent job loss, divorce, accident and illness can inflict damaging effects on people’s credit history. This is because during these unavoidable situations, people usually resort to borrowing funds. And sometimes, they find it difficult to pay back whatever amounts were owed. This inability to pay off creditors is the main reason why people receive bad credit records.
Do you also worry about bad credit? But do you want to re-establish your credit history? Well, worry no more, because this article will discuss what you can do to rebuild credit. This can be done by applying for secured credit cards.
What Secured Credit Cards Are
Secured credit cards, also known as credit cards for no credit, is a credit program offered to individuals who are yet to establish their credit history and to those who may have histories of bad credit.
This credit card program usually requires applicants to provide collateral, in a form of an initial deposit. This initial cash deposit actually serves two important functions. First it serves as the credit limit for secured credit card. This means that you can only charge your purchases and bills on the card only up to the value you have deposited onto the credit card account. If you were required to deposit $200, this will be the maximum amount of credit you can charge to you card. You cannot go over this limit. If you do so, your credit transaction will be declined, and you may be charged with declined transaction fees.
The second purpose of the collateral is for security. Should you default on your payments; the credit card company can tap into your initial deposit to pay for your unsettled charges.
Credit cards for no credit or bad credit usually have the following requirements: a checking or savings account, and a filled out application form. Lenders may also ask applicants for secured credit cards to provide proof of their employment as well as identification papers.
A negative aspect of credit cards for no credit is that some may have high interest rates and fees. Aside from paying processing fees, cardholders must pay significant amounts for interest. Still, it is important to note that such fees and rates may just be temporary. As long as you prove yourself worthy of credit, you can expect a reduction of these rates and charges.
Secured Credit Cards – Beneficial for Bad Credit?
How can you benefit from getting a secured credit card? Well, this card can allow you to succeed in your battle with bad credit. You can re-establish your credit reputation as long as you consistently pay your debt installments on time.
In so doing, you can increase your credit score and this will in turn expand your credit prospects. As long as you maintain good payment habits you can expect to qualify for low interest credit and excellent loan opportunities in the future
Secured credit cards are also excellent tools to help people manage their finances. Through these cards, you can control your spending habits. After all, you can only make purchases as long as there is available cash on your credit card. This will surely help people free themselves from uncontrolled debts and the credit worries associated with them.
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!