If you are looking for information on how secured credit cards differ from traditional card programs, then you have surely stumbled upon the right article. Below we will be discussing some of the most notable factors which differentiate secured credit card programs from regular credit card accounts.
Factors that Differentiate Secured Cards from Traditional Card Programs
1. Provision of security. As their names imply, secured credit cards require the provision security, which usually comes in the form of an initial deposit. The initial deposit requirement in this card program serves two important purposes. First it serves as guarantee for the use of the bad credit credit card. In case the cardholder fails to keep up with his credit charges, his card issuer can tap on his deposit to settle the unpaid balance. Second, the initial deposit serves as the basis for the credit limit that will be set on a credit card account. The cardholder can continue using his secured credit card for making purchases as well as in paying his monthly bills so long as he doesn’t spend beyond the limit set on his card program.
2. Ease of credit card application. Unlike most traditional credit card programs, secured credit cards are very easy to apply for. After all, companies which issue secured card accounts do not run credit checks on their prospective cardholders. So even if a consumer has less than perfect credit scores, he can still be granted the bad credit credit card he desires to use.
3. Source of credit. Secured credit cards are often linked with the existing savings accounts that cardholders have in banks and in credit unions. On the other hand, most bad credit debit cards and bad credit credit cards are funded by the available balance that consumers have in their checking accounts.
4. They are used for rebuilding credit profiles. One of the most important features of secured credit cards is that they can be used to rebuild the credit profiles of borrowers. This is because most card companies that issue these bad credit credit card accounts normally provide timely reports to the three credit reporting agencies. By providing accurate reports regarding the responsible credit habits and payments made by consumers who possess less than perfect credit scores, card issuers can help their clients cause dramatic improvements in their credit history. And eventually they can assist their loyal cardholders to fully recover their financial health.
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!