Why should you go in for secured credit cards?

Answered on October 04, 2010
Updated on October 04, 2010
The content is accurate at the time of publication and is subject to change.
Amy Miller Amy Miller
You might have heard about secured credit cards, but if you haven`t heard about it, don`t panic. This is an option that is given by a limited number of banks across the country. The trend seems to be shifting away from this option, mainly because financial institutions don`t consider it to be a particularly lucrative option anymore. So then, before delving into why you need one, it makes sense to know what it is all about. The secured card option is for those individuals that want to get credit cards but are unable to do so due to a recent credit record. Hence, for the creditors to provide any card there is a need to collect some sort of collateral from the individual. The credit card will then be issued based on the provided collateral. In many instances, this collateral will be any value between $300 and $500. Subsequently, the individual can make use of the card only for these particular amounts. The rate of interest will generally be lower, but payments will most likely need to be done within a shorter period of time. This is because creditors want to minimize the risks associated with these cards. Now, as one might imagine, secured credit cards do have a number of disadvantages. Top of the list would be the paltry amount that you are allowed to spend using this particular credit card. Hence, if you want to increase your limits, the only other option would be to go in for an unsecured credit card. This too, can be quite problematic mainly because the cards are only for those with a decent credit history to offer. Additionally, these secured credit cards are quite strict in terms of repayments. Hence, if you are unable to make the payments on time, then this is definitely not the card that you would want to consider. The other disadvantage with secured credit cards is that not all companies will offer them. Consequently, the people that do want these cards should carefully look around and seek out the banks that do offer them. Even with this, there might be certain situations when the banks might screen individuals and decide on who could qualify for the cards. The acceptance rate is quite low, in order to restrict the people from misusing these cards. Therefore, unless you feel the unsecured credit cards are not worth going in for, you ought to think twice before opting in for such a credit card. It can severely restrict your ability to spend money.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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BROWSE MORE QUESTIONS ABOUT Secured Credit Cards:

A secured card may be a great option though for getting a credit card and rebuilding your credit as secured cards are usually reported to the credit bureaus – Experian, TransUnion or Equifax. The credit limit on a secured credit card is established by the security deposit an applicant pays. Your initial deposit is usually refundable, and there are secured cards with fair fee schedules and good customer service. It means that secured credit cards work like unsecured credit cards: a cardholder will receive statements every month and will be required to make card payments monthly. The security...
Secured cards require an upfront security deposit to be paid. The credit limit on a secured credit card will be equal to the deposit you pay. The deposit is usually fully refundable. The issuers of secured credit cards can report them to credit bureaus as unsecured credit accounts. The unsecured credit cards do not require a security deposit, but may charge application and activation fees. The credit limit is determined based on applicant’s creditworthiness.
The Merrick Bank Secured Visa® from Merrick Bank may help you build your credit if you use your card responsibly with no late payments. Your account activity will be reported to all three major credit bureaus. Moreover, you will be able to get your updated FICO® Score each month for free to track your score changes.

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