Secured Cards

Post date: 2008-04-21 04:58:39

Apply for Secured Credit Cards

If your credit is bad or you have no credit history and want to establish one, you can apply for a secured credit card. You can try to get an unsecured bad credit card as well, but these cards are not easy to obtain for people with the lapse in their credit report or those who have never had a credit. Credit card companies are hesitating to issue credit to credit unworthy people. In most cases you need to have a flawless credit history to qualify for an unsecured credit.

Secured credit cards are rather similar to unsecured ones and usually have the same security and charging features. The main peculiarity of a secured plastic is that you have to pay a deposit to the credit issuer, which amounts to your credit limit. This is the usual security measure of the bank to prevent the risk that you may not pay back.

Secured credit cards remind, for the most part, of bank debit cards, except the cardholder doesn't withdraw all the money at once and makes monthly payments. These plastics are also similar to prepaid cards in the main principle that money has to be deposited first. But as for prepaid cards, there can be any amount you wish. Also there are fees and charges every time you input the funds.

Some credit card companies may give you a limit, which is above your collateral. Others will only give you a credit line, which is lower than your security deposit. If you are thinking about getting a secured credit card, search for all the available options first. A secured credit card is perfect for you:

• If you have bad credit.
• If you have delinquent student loan debt.
• If your spouse has a high debt ratio.
• If you have filed bankruptcy.
• If you are unemployed or have recently started a new job.

Secured credit cards:

• Help to establish credit history if you have no credit.
• Help to improve your credit rating if you have bad score or bankruptcy.
• Offer protection in case of emergencies.
• Give you the same benefits as unsecured credit cards.

Among the disadvantages of secured credit cards is that you have to make a security deposit, which is equal or even higher than your credit limit, the deposited funds are frozen until the time when your credit history is reestablished, and you probably won't be reimbursed for the interest on your security collateral. Of course, obtaining and using of secured credit cards has some drawbacks. As the cardholders are considered to be high risk, a higher APR is applied. This makes making monthly payments rather tough, which causes debts, and, therefore, bad credit history.

The cardholders should make sure to pay all the balance in full when the bills arrive. Remember, that making on time payments is the best way to improve your credit history. These can raise your score really fast. If you use your secured credit card reasonably, you will soon enjoy the best credit deals.