Secured credit cards to help establish credit history
One of the biggest problems faced by people with no credit history is obtaining an unsecured credit card at favorable rates. Banks and other financial institutions are not willing to take a risk when it comes to approving credit cards for new or previously good customers. As an after effect of economic downturn that the world experienced a couple of years ago, banks have implemented stricter rules and regulations making it tougher for first time card seekers to get the right card.
However, this is not the end of the road for people with no credit history. Banks are willing to offer secured credit cards as compared to unsecured cards for those who do not have a credit score to their backing. This is because the banks eliminate the possibility of losing money by requesting a deposit before issuing the credit card. The security deposit made by the customer determines that credit limit set on the card.
Though the credit limit offered on these cards is less than unsecured credit cards, it is worth making this compromise. Most of the secured credit cards have favorable interest rates, making it easy for the customers to repay on time. All payments and transactions made using secured credit cards are reported to the credit bureaus that are responsible for preparing the credit report for each cardholder. While managing this credit card wisely will help establish a sound and credible credit history, using them without restraint will land you in debt and also negatively impact your credit score, thereby posing a threat to financial wellbeing.