Secured credit cards, also known as no credit credit cards, are an excellent option for a person who has no credit or is establishing credit. For many people in these situations, a secured credit card is their only option. Over time, a secured credit card will make it possible for people with credit issue to qualify for an unsecured credit card.
What is a Secured Credit Card?
A secured credit card is a card which requires that you make a cash deposit as collateral. The amount of money that you can charge depends on the amount of money that you deposit. For example, if you deposit $200 onto the card, you can only charge $200. If you want more credit, you can add to your deposit. If you have an excellent payment history, the bank may add to your credit line, without you needing to make an additional deposit.
Where Can I Get a Secured Credit Card?
If you are considering getting a secured credit card, there are a few places where you can find them. Many credit unions offer these cards. If you bank with a credit union, you should look into it. If not, a simple Google search will bring you to a variety of companies who offer secured credit cards. Most secured credit card companies have online applications. If you choose not to apply online, most companies allow you to print out an application, and send it in through the mail.
What are the Requirements for a Secured Credit Card?
Unlike unsecured credit cards, your employment history, credit report, and income are not a factor in determining whether or not you are approved for the card. As long as you have the money to put down as collateral on the card, you will be issued one. If you graduate to an unsecured credit card after a year of good payment history, your job and income will become a factor. Credit usually will not, as you have been building your credit for the year that you had the secured card.
Why is it Important to Shop Around?
It is not a good idea to choose the first card that you find. Many of the cards available charge an application fee, and there are many who do not. To save yourself some money, you should find a card that doesn’t. It is also important to check the annual fee on the card. The fees vary, and you should shop around for the lowest one. It is important to read the fine print before deciding which card is best for you. If you don’t, your entire deposit could go toward the fees without you even realizing it.
How Much Money Would I Need to Deposit on My Card?
The amount of money that you deposit depends on the amount of credit that you wish to have. Most cards require that you deposit a minimum amount, which is usually between $300 and $500. Before you make the deposit, you should consider the percentage that the credit card company will retain for application fees, annual fees, and any other fee that is required.
Will My Deposit Earn Interest as Money in the Bank Does?
Unfortunately, most secured credit card companies do not add interest to your deposit. Some companies do, however, offer rewards on spending.
What Should I Watch Out For?
As mentioned above, you should look out for the application fee and the annual fee. You should also see if there are any hidden charges. There are secured credit card companies out there who will require you to pay a certain amount of money each month for insurance. This is a deceptive marketing practice, and the Consumer Financial Protection Bureau has been cracking down these companies, however, there are still some out there who charge these monthly fees.
How Does a Secured Credit Card Help My Credit?
There are more benefits of a secured credit card other than just ordering items online. These cards will also help build or repair your credit. Most credit card companies will report your payments to the three major credit bureaus. Over time, these regular, on time payments will have a positive effect on your credit. It is important before applying for the card to ask the issuer if they will flag the report to the credit bureaus. If you begin receiving applications for secured credit cards in the mail after making several on time payments, it is very likely that the credit card company has been reporting.
What Should I Know if I Plan to Close My Account?
If you are planning to close your account, it is important that you find out how long the money needs to stay on deposit. Certain issuers will hold the deposit for a couple months to cover any charges that have not been paid.
How Long Before I Would Qualify for an Unsecured Credit Card?
After a time of making on time payments, the issuer may extend an offer for an unsecured card. The main reason that they do this is because they want to keep you as a customer. While they want to keep you as a customer, they also need to make sure that you are going to make your payments, therefore, they will usually make you wait a year before offering you this type of card.
How Can I Build My Credit Quickly with a Secured Credit Card?
It is best to make a few purchases with your card, and pay off the balance every month. Secured credit cards are not meant to carry a balance. It is also important to make your payments on time. Because secured credit cards are meant to be a stepping stone toward an unsecured card, your payment history should be perfect. When the issuer sees that you make your payments on time, they will be likely to offer you an unsecured credit card.
If you are wondering how to build your credit fast, a secured credit card can help. Any individual with poor credit, no credit can apply for a card, as long as they have the money to put down as collateral.