Secured credit cards are credit cards wherein, to obtain one you need to deposit cash as collateral. This collateral becomes the line of credit for your account. If you deposit $600 in your account, your credit limit is also $600 that means whatever amount you deposit in the account becomes your credit limit. By depositing more money in account and making payments on time, the bank will increase your credit or reward you for timely payments.
Advantage of secured credit cards is that, it offers an opportunity to people with little less than ideal credit, poor credit as well as bad credit, to improve their credit score and still enjoy the benefits of full-fledged credit cards. So, make sure to choose the secured credit card companies that report your credit report to credit bureaus.
Secured credit cards improve your credit by sending your account report to credit bureaus, thereby helping you to fix up your credit. If you make the credit payments on time, the companies will eventually turn your secured credit cards into unsecured credit cards, so that you soon start enjoying the maximum benefits.
Costs, Eligibility Requirements and APR:
When you apply for secured credit cards, you need to pay some common fees as in other credit cards such as application fees, annual fees as well as processing fees. However, you need to consider the credit card company for which you are applying, since different firms charge different fees. Do not apply for secured credit cards from companies that charge fees because most of the security deposit goes in fees.
To apply for secured credit cards, you need to furnish basic documents such as address proof, SSN (social security number), income proof, and age proof (minimum 18 years of age) and so on. Some companies, which provide such services, require that individuals open an account with them before applying for secured cards.
Credit card companies do not charge with APR (Annual Percentage Rate) on the sum you deposit. Therefore, you can deposit the paycheck directly in the account. Normal credit card companies charge with late fees, finance charges and high interest rates if you default your payments. However, in case of secured credit cards, companies deduct the credit amount from the deposit.
Improving the Credit Score:
Check the credit report by obtaining a copy from all the three credit report bureaus at least once in a year. Sometimes, credit reports have some mistakes such as the statement of loan, which you had already paid off. Such instances hamper your credit ratings.
This is particularly crucial when you apply for the loan amount. Most lenders do not approve the loan amount if a credit report states debt. It usually takes up to 3 months for a change to appear in your credit report. Hence, it is important to check your credit report before applying for loan and accordingly inform the bureaus so that they take immediate action.
Do not use secured credit cards or other cards for every purpose, maintain decent amounts in the bank account and pay all the due bills on time.
Rebuild your credit today with a secured credit card and find more of Tom's work at FINDsecuredcards.com
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