What are Secured Credit Cards

With secured credit cards, the security/collateral given to the bank is cash. If you maintain a minimum deposit in your bank account as security, you can use a secured credit card like a regular credit card. If you delay your payments, the bank can either use your security deposit as payment or levy extra charges. This card can be used as a way to improve your credit score if you do not have a credit score yet or have a bad credit score.

How it works

When you deposit a certain amount in your account, the total credit awarded by the bank is usually the same as your total balance. This means that if you deposit $100 into your account, your total credit limit is $100, allowing you to stay within your means. As long as you deposit your dues into the account in a timely fashion, the bank will continue to offer this plan. If you have successfully proved that you can maintain good credit and manage debt, your bank might even upgrade you to an unsecured credit card that does not depend on your bank balance.

Benefits of secured credit cards

Secured credit cards are an effective way to limit your expenses and give you an opportunity to establish good credit. They are especially useful for those who have no personal loans and tend to spend more than the given limit. The best part about secured credit cards is that almost everybody can qualify for one. Even if you have had bad credit or undergone major financial setbacks in the past due to illnesses, bankruptcy, job loss or divorce, you can apply for a secured credit card and rebuild your credit score.

A few important points to remember

  • When you are trying to rebuild your credit score with an unsecured credit card, keep in mind that there are certain companies that are simply looking to make a quick buck. It is best to approach reputed banks even if their fees and interest rates are slightly higher.
  • You should also clearly discuss important aspects like interest rates and security deposit to be sure about all the costs involved.
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How to Find the Best Secured Credit Cards

Secured credits cards are very helpful to people who have no credit score or want a second chance to build a better credit score. There are several credit cards that cater to different kinds of people. Depending on your income, credit limit and the prevailing interest rates, you can choose the right plan that will help you manage your money in a smart way. Here is a look at why you should consider such a card and how to find the best secured credit cards.

How are secured credit cards useful?

It is a known fact that in order to get a credit card, you should maintain a good credit score. If you do not have prior credit or have a poor credit score, applying for an unsecured credit card becomes very difficult. In such cases, opting for a secured credit card is a good option as it incorporates effective spending and saving habits.

What you should remember

Just like unsecured credit cards, secured cards have various expenses that must be met on a monthly or yearly basis. Here are a few guidelines that will help you find the right plan among the best secured credit cards available.

  • Fees, penalties and other additional expenses are a part of any service offered by a bank. Charges surrounding secured credit cards are very similar to regular credit cards and cover application fees, annual fees, interest rates and a pretty high security deposit. You should look for reputable banks that do not charge an application fees and offer competitive interest rates.
  • Reading the fine print is very important before you decide to apply for a secured credit card. Extra expenses that are not otherwise discussed in the main contract are usually stated in fine print. It is best to read the contract completely before you sign it to avoid unnecessary expenses in the future.
  • Make your decision patiently as there might be many banks and organizations persuading you to buy their credit cards. With so many providers offering different plans, you could be lured by the so-called ‘attractive’ offers. It is best to conduct a thorough research before you pick a bank or provider, keeping reliability and reputation in mind.
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Secured Credit Cards To Rebuild Credit

How to Rebuild Your Credit Score

With many people losing their jobs and assets, paying back loans has become a major concern. When there is excess accumulated debt and a bad credit score, using secured credit cards to rebuild credit score is an option many are choosing.

What are secured credit cards?

Secured credits cards are a form of loan or credit offered by a bank to help you rebuild a good credit score. Banks ask customers to deposit a minimum amount to continue using the credit card. With timely payments, you could improve your credit score and earn an upgrade to unsecured credit cards.

Advantages of secured credit cards

When you default on your payments, your deposit is used to account for the same. So, unless you end up spending over and above your security deposit, you won’t have to worry about a third-party debt collector (known as “collections”).

Secured credit cards are a great way to improve your credit score. As the credit limit is based on how much money you have deposited in your account, chances of over spending are slim. This also enables a responsible behavior and incorporates a habit of making timely payments and savings.

A major advantage of a secured credit card is that anyone can apply for it. While unsecured credit cards are not offered to those with no credit or a bad credit score, secured credit cards provide you with a second chance to improve your score or build it. By using secured credit cards to rebuild credit, you can establish or re-establish your credit score quite easily.

Reestablishing good credit

The main intention of a secured credit card is to offer a fair chance to those who have suffered financial setbacks and earned bad credit scores. Good credit scores also improve your chances to choose better avenues like loans and unsecured credit cards in the future. When you use secure credit cards to rebuild credit score, you can greatly improve it by spending within your limits and making timely payments.
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