If you want to apply for secured credit cards, consider these top ten Frequently Asked questions along with the answers:
1. What is a secured credit card?
It is a type of credit card that is created for people with bad credit or no credit history. To make up for the risk, the applicant is required to submit a deposit. The amount of deposit will also define the secured cardholder’s credit line.
2. How do I apply for a secured credit card?
Some banks and credit card issuers offer a secured credit card. You can personally apply from your local bank or send an application online. If you are a member of a credit union, you may inquire if your Union offers a secured credit card to enjoy lower interest rate and fees compared to commercial Issuers.
3. What fees should you be aware of?
Some secured credit cards charge an application fee while others may not. Although all secured credit cards carry annual fees, you should be able to find a card with a reasonable annual fee by doing your research. Carefully examine the fine print to make sure that there are no hidden charges.
4. How much is the security deposit?
The security deposit may runs from $300 to $500, depending on the Issuer. If you need a higher credit limit, be prepared to raise your cash deposit as well.
5. Can a secured credit card help me get out of bad credit?
Yes. A secured credit card can be used for rebuilding bad credit but this will depend on the kind of card you choose and how you will use it. To rebuild credit, you must use your secured regularly. However, it is important to pay back your charges on time at all times. More importantly, you need to make sure that your payments will be promptly reported to all three major credit bureaus as it is the only way you can raise your credit score.
6. Will others know that I’m using a credit card for bad credit?
No. Your card will not show any sign or print indicating that you are using a secured account because you have bad credit history. That information is exclusively between you and your secured card Issuer only.
7. Will my deposit earn interest?
Some Issuers place the security deposit in a timed deposit account to earn interest. Before choosing a secured card, understand how long your money has to stay in the deposit account should you want to terminate your secured card. Furthermore, understand if you can keep the interest your money earned or if it will go to your card’s Issuer.
8. Can I get an upgrade to unsecured credit card?
Some issuers will automatically upgrade your account to an unsecured credit card after a year of consistent payments. You can also request for an upgrade if you think you have proven your credibility as a cardholder.
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!