Credit card is a great way to build or rebuild a credit history. However, people with bad credit find it difficult to apply for a traditional card. No need to worry since there are credit card companies offering secured credit cards. Here are some frequently asked questions about this type of plastic card:
What is a Secured Credit Card? Unlike a traditional credit card, a person who wants to apply for this type of credit card is required to deposit a certain amount of cash that will serve as guarantee for the debts.
The security deposit will also determine the value of your credit limit. For instance, if you submitted $500 in your account, you may be given a $500 credit line. You may submit a higher amount than the minimum required deposit if you want to enjoy a higher credit limit.
After a few months, the bank may reward you for your good payment and raise your credit line without asking you for additional deposit.
Where can I get one? Many issuers offer this type of credit cards. You can go check their websites and compare the interest rates and fees each credit card company offers. It is also wise to ask a bank representative for further information.
How much money do I have to deposit? Issuers usually require a deposit amount of $300 to $500 depending on the issuer's evaluation of your application. If you need a higher credit limit, you may also submit a higher deposit than the minimum amount required.
What are the other charges or fees I have to pay? You will be required to pay an annual fee to keep the account active. However, you can always find a credit card with lower fees and interest rates. This is the reason why it is recommended to shop around first. After this, compare all your possible options and choose the one that offers the best deal.
What are the things I should consider when choosing one? It is a must to know how much interest rate and fees you are going to pay for. You should also look-out for hidden charges. Read and understand the fine print. When it comes to the credit line, choose the one that is just right for your budget.
Another thing you need to check is if your chosen credit card issuer reports to all three (3) major credit bureaus. One of the reasons why people acquire secured cards is to rebuild their credit history so it is important that every payment you submit is well-accounted for.
Are there any problems I should be aware of?
The Advantages:
1.Anyone can apply even people with bad credit.
2.Great way to rebuild a bad credit history.
The Disadvantages:
1.There are certain issuers and scammers that are seeing how vulnerable people with bad credit are and they take advantage of this. They will sometimes give you the card but will require you to purchase an insurance policy first.
2.Some will ask you to pay an upfront fee.
3.Higher interest rates
How long will it take before I can qualify for an unsecured credit card? Most credit card issuer will allow you to apply for an unsecured credit card after making timely payments for at least a year.
Tips on How You Can Use Your Credit Card To Your Advantage
Pay on time. Since you are trying to establish or improve your credit ratings, it is important to always make payments on time. You are not only improving your credit score but you are also avoiding penalty fees by doing this.
Use your credit card wisely. Make sure that you only use your card to purchase important items.
Copyright (c) 2010 Tara Tiemann
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