Credit Card Basics – Secured Credit Cards 101

We all know having a good credit score is a necessary thing in life.  The benefits of having a high credit score means you will have a easier time qualifying for a home loan or qualifying for a auto loan many other purchases that are too much to pay cash. But attaining that good credit score and keeping it isn’t always very easy, and if you’ve got a low credit score from previous mistakes you might have made, getting another credit card to use to rebuild your score can be quite difficult.

One option is a secured credit card. This is a type of card was created for people with no credit scores who are therefore considered high risk. When applying for a secured credit card, you will put down a deposit, which the credit company will hold as collateral in the event you default on your payments. The credit card company will use your deposit to try to recover their money if you default on your obligations on your account.

Secured cards have credit limits similar conventional credit cards, and those credit limits vary depening on which company you choose. The most common way for Secured Credit Cards to determine the credit limit is to make it the same as the beginning deposit – meaning if you deposit 400 dollars to create the account, then your credit card’s beginning limit would be 400 dollars. Other Secured Credit Card programs may allow you to have a limit that is more or less than the deposit amount, depending, with people with higher credit scores getting the higher limits as opposed to the lower limits people with worse credit scores may get.

If you’re considering getting a secured card to help repair your credit, make sure you read all of the fine print before opening the account. Although a initial deposit will be required in order to guarantee collateral if you stop paying your credit card bills, the issuing company only goes after that deposit as a last resort. This means that if you are late on a payment, the credit company may not take any money from your deposit, and charge you interest and penalties for a time instead of using your deposit. In this way, you can manage to end up with even more debt than you started with if you are not careful.

As long as you remain vigilant about making your payments and carefully inspect the terms before agreeing to open up an account, a secured credit card may be a good option for you if you’re looking repair past credit mistakes or have no credit to begin with. Just bear in mind that they are easier to acquire than “regular” credit cards because they can often land you in more hot water later due to their fees and restrictions.

Rebuild Credit Quickly with a Secured Credit Card

Having bad credit scores can make getting a conventional credit card difficult, but the situation is not impossible to fix. There are options to get what is known as a secured credit card that you are virtually guaranteed to be approved for.

If you need or want a credit card but are nervous that your poor credit score will stop you, then you perhaps you need some advice about how to get a credit card even with low credit scores. Follow these steps to have a much better chance of getting a secured credit card:

Retail Store Credit Cards

If you have low credit then one of the best places to start applying for credit cards are at small retail stores. Retail Stores typically have high approval rates, but their interest rate and fees can sometimes be high as well If your application is approved, then buy something small each month and then pay off the bill. This will show other credit card companies that you are able to handle credit and pay your bills. Make sure that the credit issuing company reports to the three major credit agencies.

Get a Bank Credit Card

After you have had a store charge card for some time, the next step is often to apply for a card at your bank. If you have been with your bank a long time and you have performed well with them, then they might be able to help you out.

Secured Credit Cards

If you are like most people with low credit and are unable to get a bank or store card, then try and get a secured credit card first. This involves putting down a deposit that is held by the credit issuing company while you use the card. This collateral takes away some of the risk for the lender and approval for this type of card is almost guaranteed. Check to make sure that if you pay your bills then eventually you can upgrade to a regular unsecured credit card.

Avoid annual fees

Avoiding getting a credit card with an annual fee used to be much easier. There used to be plenty of credit card companies that did not charge annual fees – but those times are rapidly changing. Almost every secured card also requires an annual fee. Stick to well known card types like Visa and MasterCard as they are common and widely accepted. This will help you to make the most of the credit you have.

Using your card

Once you have a secured credit card, remember that it is for rebuilding your credit score and financial profile. Only spend what you can afford to pay on the minimum payment plus a good piece of the remaining charges .  If you pay off your bills on-time, then your credit rating will improve in a few short months and you can get better terms and a higher credit limit.

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