What are secured credit cards? Can they help or hinder your credit score? What are the advantages and disadvantages? Find out more about secured credit cards and whether you should use one or not.
We have a love-hate relationship with credit cards. At times they have been our knights in shining armor, coming to our rescue during an emergency. At other times, they have been a demon that got into more financial trouble than we could have ever imagined. Following the recent economic crisis, many of us find ourselves unable to live without them and others find ourselves unable to get a good one when we need them.
While ideally we are all looking for credit cards that offer low interest rates, no annual fees and no money down, unfortunately that isn’t always an option. If your credit has taken a down turn during this economic down turn, then secured credit cards are an option that may be worth examining. It’s important to know the cons and also the benefits of a secured credit card. Secured credit cards are also a consideration for those who haven’t yet established a credit.
How is a Secured Card Different From a Regular Card?
The name tells the tale. The security is really for the credit extender but extends to you the cardholder as well. The reality is that the secured credit card lenders offer credit cards to users that are considered a “high risk.”
To obtain a secured credit card, the applicant must make an upfront payment that is sometimes equal too, or sometimes less than the credit limit.
Secured credit cards may be of interest to those who have no or less than perfect credit including:
-Those with damaged credit
-Those with no credit
-Those who have declared bankruptcy
What fees can you expect for a secured credit card?
-You can expect a higher than usual interest rate, at least 20% or more.
-You can also expect an annual fee of at least $50.00 or more.
In general, everything about the secured credit card is something that most of us want to avoid. However, if you are in one of the unfortunate situations listed above, it can be good to know that there are credit cards available that help you to rebuild your credit.
Strategies for building credit with a secured credit card:
With a secured credit card you’ll have to pay to play but if you play the game right then you can win by building positive credit.
1. You’ll have to use the secured credit card to build credit.
2. Make all payments on time by mailing at least 7 days before the due date of your payment.
3. Avoid going over the limit.
It’s not for everyone but if you need one, a secured credit card can help you rebuild credit and also help you to gain money management skills that will benefit you in general. If you cannot obtain a traditional loan or credit card, then check out secured credit cards and as always read and follow all of the fine print to ensure that a secured credit card helps you rather than hurts you.