Secured credit cards are some of the most misunderstood financial tools of our time. While many people think secured credit cards are “less” of a credit card than unsecured credit cards are, this couldn’t be further from the truth. If you want to know the cold, hard facts about the world of secured credit cards, we have some information you need to read.
1. It’s NOT a Stigma
If you think you’ll be stigmatized each time you pull out your secured credit card from your wallet, you’re being just a bit paranoid. When you use secured credit cards, the only people who know that the card is secured is you and the bank. The people who swipe your card won’t even realize that you’re using a secured cvv shop.
2. You DON’T Need Thousands of Dollars
While it’s true that some people open up secured credit card accounts with a deposit of more than one-thousand dollars, the fact is that you can get a secured credit card with a deposit of just a few hundred dollars to start. If you eventually want your credit limit to increase and you aren’t yet ready for an unsecured line of credit, you can usually add money to your deposit amount in future installments.
3. It DOES Count On Your Credit Report
Some people mistakenly believe that the companies that offer secured credit cards don’t report account activity to the credit bureaus. This definitely is not the case. Your secured credit cards will appear on your credit report, as will your payment history.
People who think secured credit cards aren’t reported are usually confusing secured credit cards with prepaid credit cards. Prepaid credit cards are not reported to the bureaus. With a prepaid credit card, you put money on the card and when you use it, you use it. There is no revolving line of credit. This is very different than how secured credit cards work.
With secured credit cards, you put money into a savings account that acts as a guarantee for the revolving line of credit you are being issued. Each month you are billed for the purchases you made to the card and you must make minimum monthly payments, just as with an unsecured credit card account.
4. Interest Rates Are NOT Better
Some people think that secured credit cards offer much lower interest rates because the account is guaranteed by a bank account. This isn’t necessarily true. With secured credit cards, the interest rates are usually in the same ballpark as they are with unsecured credit cards (10 to 20 percent, depending on the card).
5. Some ARE Bad News
While it’d be nice to think that all secured credit cards are intended for the good of those who need them, that just isn’t the case. When applying for a secured credit card, make sure you only deal with reputable companies.
If a company charges extremely high interest rates (more than 18 or 19 percent) or an application or processing fee, then take your business elsewhere. You should never pay more than you have to and there are many secured credit cards that won’t abuse you with these unreasonable terms.
6. Rewards ARE Available
If you’re one of the many who believe that secured credit cards never have rewards programs or perks, you’ll be happy to find out that isn’t the case. There are some secured credit cards that do indeed offer rewards programs, although you may need to pay a minimal annual fee to enroll.
7. The Deposit IS Refundable
You get one or two secured credit cards and use them for about a year. Your credit is looking much better and you’re now eligible for an unsecured credit card with much better terms. You want to close your secured credit cards, but what happens to your security deposits?
When you send in a deposit for secured credit card, it goes into a savings account and the money still belongs to you. When you close that credit card, the money is sent back to you with the interest the savings account has earned once the balance of the card is paid in full.
Now that you know the facts about secured credit cards, go ahead and find the card that’s right for you. Remember, secured credit cards may not be your dream card, but they are definitely a means to that end.
A secured credit card is in effect the opportunity to regain a sound financial position.
Due to the easy accessibility of credit reports through well-established credit bureaus today, credit issuers rely increasingly on these reports to make their final decision on providing you credit. A credit card is often denied to you when you do not have a credit history. This is often in the case of the young adults who have never taken out a loan or have so far used a credit card through a parent. It can also occur in the case of divorced people who have never had a credit card in their name.
Secured credit cards [http://www.creditrunner.com/secured-credit-card-offers] thus provide the best means for anyone to establish a credit history. The secured credit card by virtue of being secured by your own money allows the issuer to feel safe, ensuring their money back in case you default. Since the issuer is also holding your money, they persuade you to make your payments regularly instead of losing your security deposit on the secured credit card.
Secured Credit Card – A credit card with a security deposit
Very often when you rent an apartment, the landlord will ask you to deposit an amount equivalent to a month’s rent into a special account. This amount acts as security and is not used till you move out. When you move, this money along with interest is returned to you. You will not owe the landlord any money if you leave the apartment without any damages. The same rule applies to the secured credit card. In a secured credit card you have to deposit an amount as security equivalent to 50-150% of your credit limit in a special account with the credit card issuer. The credit card issuing company will provide you with a secured credit card which is used like a regular credit card. The only difference being that only you and your credit card issuer know that the secured credit card has attached to it a security deposit.
Provided you use your secured credit card wisely, the security deposit will not be used. This means that the secured credit card will be used to make reasonably priced purchases and the monthly bills will be paid regularly and fully as far as possible. To increase the credit available to you on your secured credit card, you can either increase your security deposit or get as many secured credit cards as possible. The credit card issuer will soon increase your credit limit from 50% of your deposit to anywhere between 75% and 100%.
The interest rates on secured credit cards are usually quite high. In the even that you have been rejected for credit by some companies you will be thought of as a significant credit risk. The issuing companies are taking a huge risk in lending you money through secured credit cards, and these interest rates are based on these risks.
