Secured Credit Card Information

If you are having a difficult time obtaining credit regardless of the reason, a secured credit card may be the only way for you to rebuild or build your credit standing. Secured credit cards are linked to a bank account and allow the credit card company to deduct payments from the cardholder should they fail to make a payment. Sounds great right, especially if you can’t get a credit card, but there are some other things to consider before signing up. Here is some helpful secured credit card information to help you make an educated decision.

How does a secured credit card work?
Secured credit cards help you establish history that can be to your immediate advantage and also help you out in the future. As stated before, the money is taken out of a bank account, so the cardholder will deposit anywhere from three hundred dollars, up to ten thousand dollars into the account. Your credit line will reflect the amount you have deposited. The cardholder can then make purchases on that card up to the amount they have deposited keeping in mind that they will have to make at least the minimum payments before the due date of each month. The best way to use any credit card is to keep the balance at zero; then you don’t pay any of the fees and finance charges. Based on the payments and credit history through this card, you can increase your chances of qualifying for an unsecured credit card in the future.

Before you apply for a secured credit card
Before you apply for a secured credit card however, there are some things you should consider, and questions you should ask yourself and your bank.
1. What are the costs? Unfortunately nothing in life is free anymore and it is no different with a secured credit card. They too have costs some of which include application fees, processing fees, and most certainly annual fees. Make sure before you jump into buying one of these that you k now what and how much the fees are and whether or not you want to pay them all. Sometimes with these kinds of cards they can use up all of your security deposit because the fees are so high. Don’t go into buying a secured credit card blindly; know your stuff.
2. How much is the deposit? As you are already aware, secured credit cards are “secured” with a deposit that is held in an account. This account is used as a default if you don’t make a payment on time. Most secured credit cards have a minimum amount deposit; usually somewhere around $300. And some may also have a maximum amount so check with your bank and figure out what they are. Some secured credit cards even have the option of depositing your money in an interest-bearing account. In regards to your deposit amount, you have some different options, so talk with your bank about what they are for you.
3. How do you know if you’re eligible for a secured credit card? Some secured credit cards will have restrictions on age and how much income you make; others may have none. Most however do require that you already have a checking or savings account with their bank before they’ll consider extending you a secured credit card.

Most secured credit cards will allow you to convert into an unsecured credit card after a period of timely payments has been made. This can allow you to lower your fees, interest rates, and have fewer restrictions. Make sure you have all the secured credit card information you need before you decide that this is really what you want to do.