A secured credit card needs a cash collateral deposit that acts as the credit line for the account. For instance, if you save 500 dollars in the account, you will be able to charge up to 500 dollars. You may add to this deposit if you wish to extend your credit.
However, the bank can choose to reward you with a bigger credit line without asking you to increase your deposit if you pay on time.
Where can I get a secured credit card?
Search for a list of secured credit card issuers on the internet. Are you a member of a credit union? You should ask your credit union about secured credit cards. As a credit union member, you might qualify for lower rates than other people, and your annual fees could be waived.
For this reason, you should make sure that you ask your credit union before you look for other alternatives.
What kind of fees do you charge?
It pays to shop around if you want to find the best rates. You should avoid any card issuer that asks you for an application fee. Most secure cards charge a yearly fee, which varies drastically from one lender to the next. Before putting your signature on anything, you need to read the fine print.
You do not want your deposit to be eaten up by fees before you use the card.
How much should you deposit?
The amount you need to deposit will depend on the type of card. Most credit cards will allow a minimum deposit of 300 dollars. This means that your credit limit will be the same as your deposit or a small percentage above this amount.
Do all banks offer secured credit cards?
Not all banks offer secured credit cards. Some banks are leaning towards unsecured cards that have higher rates of interest and lower limits. Even so, secured cards are a good choice if you are rebuilding after a major life event – such as serious illness, divorce, or job loss – or just starting out.
Moreover, some card issuers only provide secured cards to persons who are new to credit, not those who have had a shot and blown it.
Are there problems to watch out for?
Some secured credit card issuers have low fees and treat customers well. However, others take advantage of new clients and extort them because they are desperate for money. You need to gather plenty of information when applying for a card. Also, you should check out online reviews for the best secured credit cards before choosing any particular issuer.
Does the issuer report to the major credit bureaus?
Having a secured card has many advantages aside from being able to purchase things online. It is also a means of building a good credit history. If your potential card issuer does not report to the major credit bureaus, you will have lost a major benefit.
Will the issuer flag your report to the bureaus as a secured credit card? This might be a deterrent to rebuilding your credit.
How long until I qualify for an unsecured card?
The card issuer might not want to keep you as a client. Therefore, he might qualify you for an unsecured card only after you prove that you can make your payments on time. This can take up to a year.
Will your deposit earn interest?
Most card issuers do not pay any interest on security deposits. However, a few will offer rewards whenever you spend. You also need to ask how long the money will stay in your account after you close it.