Credit cards are an important financial tool. However, many people who have a poor credit history or no credit history cannot qualify for a typical credit card. So what options are there for getting a credit card with poor credit history? One option is a secured credit card. Here are some points that will help familiarize you with secured credit cards.
What is a Secured Credit Card?
A secured credit card is connected to a savings account; the amount that you have in this account acts as your credit line. You can’t go over this credit limit, ensuring that you won’t spend more than you have. The credit line can be increased by adding more money to the account. Your financial institution may also increase it if you are responsible with your credit card.
What are the Charges for Secured Credit Cards?
The charges for a secured credit card vary depending on the financial institution you get it from. You will have to read the card agreement carefully to determine all the charges that you will have to pay for the card. Try to avoid paying large fees for the credit card.
What is the Minimum Credit Line for Secured Credit Cards?
You can expect to deposit a minimum of $300-$500 in your credit line account. Some financial institutions may have a different minimum amount, but usually $300-$500 is the standard minimum deposit for a person to get a secured credit card.
How will a Secured Credit Card Impact My Credit History?
A secured credit card is a way for you to rebuild or create a good credit history. Having a credit line with your credit card allows you to rein in your expenses. You will know when you have built a strong credit history when you start receiving mail from other financial institutions to apply for unsecured credit cards.
Make sure that the secure credit card issuer is reporting your credit history to the relevant bureaus. Some financial institutions will not do it unless you ask them to. Contact your financial institution to verify they are sharing the required credit information.
When Can I Get an Unsecured Credit Card?
Once your credit history has recovered enough, you will want to get an unsecured credit card. The best approach to get a regular credit card would be to apply for one from the financial institution that gave you the secured credit card. If you have a good relationship with your financial institution, it may be easier to qualify for the credit card that way.
Facts About The Account Tied to Your Secured Card
There will be no interest added to the deposit you make originally, though you may be able to earn some rewards for spending via secured credit card. Financial institutions will also hold on to the deposit for a little after you have cancelled the card, just to make sure there aren’t any additional charges.
Best Buying Practices
Some people believe that after getting a secured credit card they can improve their credit without making purchases. However, you will have to make purchases with the card periodically and pay the bills off on time to improve your credit. Remember that secured cards may have a higher interest rate, so don’t use them to purchase excessively expensive items. This is also the reason you should use a secured credit card for a limited period and then apply for an unsecured credit card once your credit improves.
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Secured credit cards are a decent option for people who want to establish a good credit history or improve their existing credit rating. Be sure to have all of the information that you need to use secured credit cards effectively.