Secure credit cards help users out of credit wilderness. Unlike standard credit cards, secured credit cards work very differently. The cardholder needs to make a deposit prior to securing the card and it can be equivalent to or greater than the initial credit limits. The aim is to help one build their credit by reporting financial activity to credit bureaus. There are a number of benefits of a secured credit card and one must know how to use a secured credit card. If you know what is a credit card, then understanding a secured credit card is simpler.
Who should get a secured credit card?
Once you understand what is a secured credit card, here are a few points to show
- Secured credit cards are a great option for individuals who do not have the best credit and the same poses as a threat to getting loans and other advantages.
- Individuals who are new to the credit space and seek to build a good reputation. It helps one build a strong credit history that enables one to apply for secured cards that offer more rewards.
What is the deposit needed to acquire a secured credit card?
The deposit required to get a secured credit card can differ from one institution to another. With most banks, the deposit can start at $250 or sometimes less. When you pay a deposit, you get a refund amount in the form of a credit limit of the given amount. If you are lucky, you get a permit for a credit limit that is above the deposited amount or the limit increases after a few months. Once you know what is a secured credit card, you must understand the factors that assist you in using these cards effectively.
Factors to help use secured credit card offers and options efficiently:
- Pay in full
The best way to wisely make use of your secured credit card is by making payment in full. It is certainly beneficial to keep the utilization ratio low as this ensures sending the best records to major credit bureaus.
- Make timely payments
Paying on time is not just beneficial to your credit history but also keeps unnecessary high-interest rates at bay. Regular late payments can also lead to the suspension of card usage. Hence, always make sure that payment is made every month, on time.
- Build a strong credit
Carrying balance to the next month will reflect badly on your credit history. The secured credit card is primarily used to build a good credit and that’s what you must try to do. You can begin seeking other advantages after getting yourself an unsecured credit card in the future.
- Regular credit
It is very important to make sure that secured credit cards regularly used, each month. You do not want to leave the card in your wallet and forget about it. Remember, it will be difficult to build credit from several months.
How to get a secured credit card
- The process of applying for a secured credit card begins with checking your credit report for any inaccurate information and correcting it. Now apply for a card and understand why you need to pay a certain fee.
- During application, provide information to the best of your knowledge or it can lead to loss of account. Ensure that reports to the major credit bureaus are accurate or you won’t derive any benefits from the secured credit card.
- The key is to apply for one card at a time. As multiple cards will lead to falling back in credit scores.
After understanding what is a secured credit card and how to get one, you can also take a look at rewards credit card.
Tips to get the best secured credit cards
- The most important step here is to check if the secured credit cards are by the best banks and institutions. This will enable one to avoid unreasonable fees and interest payments for the product.
- After seeking the right institution, an individual must look for a secured credit card with low annual fees. And also one that will fetch an interest on the deposited amount.
- Not all reputed banks offer secured credit cards to individuals with recent bankruptcy and bad credit history. Therefore, the applicant will have to carry out a wider search for the best provider.
Most often, secured credit cards are known to have a bad reputation. This is because several companies that offer secured credit cards use this opportunity to levy exorbitant interest rates for people with poor credit. However, when sourced from a reputed company, this finance tool can aid in building a very strong credit base and allow one to enjoy good benefits that they may otherwise be unable to qualify for.