Are secured cards the solution for people with bad credit

Thursday, November 11th, 2010

Individuals who have had a bad time financially would have seen their credit scores hit rock bottom. For such individuals who wish to improve their rating, secured cards seem like a good option. But do they really work for those with bad credit? Card companies have secured credit cards in order to assist someone to build good credit history and undo the damage. Borrowers may find it difficult to find lines of credit which could help their situation, but secured cards offer the credit line which could be used to rectify one`s financial situation.

Some of the banks that offer secured credit cards are Wells Fargo, Bank of America, Capital One etc, but there are many other players as well. There are other financial institutions also that help in rebuilding credit. However, there has been some indication that a few institutions have moved away from secured cards, there are still a number of reputed institutions such as credit unions which come to the rescue by offering these cards and assisting individuals to rebuild their credit history.

All types of secured credit cards would certainly require some collateral in the form of assets or cash. The collateral that is provided by the borrower acts as a security in case of non-payment and this way the bank is safe. But still the money that is deposited is not utilized by these banks like funds from a debit card. But the money would certainly be utilized in case of non-payment by the card holder.

However, analysts suggest that those seeking to repair the damage due to bad credit should be certain that they are in a position to make charges on the cards but should be doubly sure that they are able to pay off the balance each month and not carry any balance forward, as these cards are not designed to carry forward balances. In order to maintain these cardholders have to maintain discipline and make purchases that are not only affordable but be prompt in their payments each month and avail the maximum benefits from the secured credit card.

However, just obtaining a secured credit card will not solve the problem unless and until a sincere effort is made by the borrower to make amends and there is no guarantee unless one is smart with the use of the card. Simple financial planning, saving, proper budgeting, and timely repayment schedules would be required (by the borrower) to see the benefits of the card and use it to its potential.

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