SECURED CREDIT CARDS 101
August 13, 2020
There are two types of credit cards- Secured Credit Cards and Traditional Credit Cards, today we are talking all about Secured Credit Cards and how they can benefit you.
The Benefits Of Secured Credit Cards
Traditional credit cards usually get a bad reputation and honestly I don't blame them- if you don't understand how to properly use a credit card you will end up doing yourself more harm than good. Traditional Credit cards are borrowed money, your line of credit is based on borrowed money which means everything you use NEEDS to be payback- if you don't pay it in full a penalty aka interests will be charged.
BUT one of the advantages of a credit card is helping you build your credit score (when used correctly)- now if you have bad credit or you have no credit at all, obtaining a credit card will probably be out of the picture and this is where a secured credit card comes into play.
If you are starting to ask yourself what is a secured credit card and where to get one- don't worry, you got questions and I have answers.
What is a Secured Credit Card?
- A Secured Credit Card its a credit card that offers an opportunity to build or rebuild your credit when it's used responsibly. A Secured Credit Card is usually offered by banks and these cards required a refundable deposit which is heled as collateral for the account. This deposit is also used as your line of credit. If you don't make your payments the card issuer (the bank) will keep the deposit.
How Does it Work?
- You apply for a secured credit card through the bank of your choosing (usually the bank you are already banking with). If you are approved by the bank, the bank will let you know the amount of your line of credit, which will be the equivalent of your required deposit.
Once the bank receives your deposit, you will receive your credit card in the mail- active it, and you are ready to go.
Benefits Of A Secured Credit Card
- It helps establish or re-establish your credit. Your payments are included/reported in your credit report, paying on time, and managing your balance will help improve your credit score.
- A secured credit card can be used in the same way as a traditional/normal credit card.
- Many can often get approved for a secured credit card because the requirements are less than the ones for a traditional/normal credit card.
- Typically with a secured credit card used responsibly in 6-12 months, your credit can go up and you can apply for a traditional card.
- Many Secured Credit Cards also offer cashback or Rewards
Cons Of A Secured Credit Cards
- These cards usually have higher interest rates- by paying your full bill each month, you will avoid any interests
- Most Secured Credit Cards have Annual Fees
- Some might require some credit history
- Will not get your security deposit back until the account is fully closed
Known Banks That Offered Secured Credit Card
For the specific requirements and how to apply for a secured credit card, current APRs as well as offers make sure you visit the bank's official website.
Think of a secured credit card like a checking account that gets reported on your credit report and one that requires monthly payments, because essentially your line of credit is only what you deposit (and nothing more)- this money isn't borrowed (like a traditional credit card).
There are many benefits of a secured credit card when it's used correctly, you can build credit, learn how to use a credit card, and eventually move to an unsecured credit card. Remember to pay your balance in full to avoid any interests.
0 comments