Secured Credit Cards- Consumer Tips

Whether you have no credit or damaged credit, secured credit cards are a good tool for building a good credit history.

Several months ago Tom, a member of CreditBoards.com, filed a Chapter 7 bankruptcy. Now is in the process of rebuilding their credit history. It is a task that is not easy but with perseverance the patient sees progress already. Everyday will check your credit score and see slowly improving.

1 - In addition to correcting every mistake, even the smallest, credit report, that uses a secured credit card.

2 - This secured card is an important tool for the whole process of building or rebuilding credit.

Who should consider a secured credit card?

Someone who has no credit history.

Someone with a damaged credit history.

What is a secured credit card?

Secured cards are credit cards opened with a deposit into a savings account, money market or certificate of deposit. The amount of deposit required varies from card to card, but generally minimum amounts range from $ 250 - $ 500. These funds are safely and you will win even a small interest, since it held in a savings account. Your credit limit is determined by the amount you deposit in a savings account. Sometimes the limit will be for the full amount of the deposit; Other times it will be a percentage of the total.

It is important to bear in mind that a secured card is a credit card, no debit card. If it is not made full payments each month, then charged at the rate of the rest. And the credit institution uses the money for security for the repayment of the debt only as a last resort. Even if the card is secure, it's still possible to credit losses.

What are the benefits of a secured credit card?

Credit creation. If you have never had a credit card, a good first step to establishing good credit applying for a secured credit card. Assistant Professor of Economics at Austin Peay State University in Clarksville, TN, Jerry Plummer, says: "A secured card is more useful for the person starting their credit history, after saying that the person is willing to take the extra step create credit. "

Restoring credit. If your credit history is damaged, you may only be able to qualify for a secured credit card. Using this secured card properly and within the parameters that will help rebuild your credit and you qualify for an unsecured card. If you had to declare bankruptcy, however, may not qualify until it is discharged.

Predetermined limit may be exceeded. If poor spending habits were part of the reason for bad credit, a secured credit card will help keep costs under control.

Useful for transactions that require a credit card. Hotels and car rentals require a credit card. If you do not qualify for an unsecured card but you do for a secured card, you are still able to make the transaction.

What should I look for or avoid when shopping for a secured credit card?

Fees. This is the area you really want to research when shopping for a secured credit card. Some cards come with fees that run hundreds of dollars, eating away a large part of credit secured by savings account. Professor Plummer says a card is not the best, but a small one time fee may be in order. Annual fees for attractive secured cards typically range from $ 20 - $ 35. Be sure to watch for hidden charges as "fees" and "installation costs."

Rate. Just because you have no or bad credit does not mean you have to settle for higher interest rate. Interest rates for attractive secured cards should not exceed 19%. Shop around and get the most competitive price available.

Read the fine print. Linda Tucker, Director of Education for counseling on consumer credit for Arkansas and Memphis, stresses the importance of reading the fine print. Doing so will let you know exactly your obligations to the issuing company: for example, grace period, what would happen if you make a full payment, and what fees are attached if you do not make full payment. Understanding these elements will help to ensure no further damage your credit.

Fraudulent offers. As with unsecured cards you need to watch for fraudulent offers.The Federal Trade Commission offers the following tips to protect yourself from credit card fraud:

* Offers of easy credit. Nobody can guarantee you get credit. Before deciding whether to give you a credit card, legitimate credit providers examine your credit report.
* A call to the number '900 'for a credit card. You pay for calls with a prefix of '900 '- and you can never get a credit card.
* Credit cards offered by the companies' credit repair "or" credit clinics. "These companies can also offer to clean up your credit history for a fee. However, you can correct genuine mistakes or outdated items in yourself by contacting credit bureaus directly. Remember that only time and good credit habits will restore your credit worthiness.

When will I qualify for an unsecured credit card?

It may take several months to see an improvement in your credit history. Bankrate says it is a good indicator when you start receiving flyers in the mail for unsecured cards that your credit improves. However, it is a good idea to keep taking things slowly. Using a secured card will help you learn healthy habits so that when you do get an unsecured credit card you can keep control of spending and credit.

Where can I get a secured credit card?

Most companies do not advertise secured cards. But you can visit the Card Reports section of http://www.CardRatings.com to learn where and how to apply. Click on the link entitled "Cards for consumers with bad or no credit."

Other tips

Tom recommends sticking with only one or two cards and keeping spending to a minimum. The goal is to pay the card each month.

Tucker emphasizes the importance of paying the amount due each month; Otherwise, late fees can be charged, interest rates raised, privileges lost, and credit history negatively affected.

Make sure to get a credit card, unlike a gas card or a card store.

Make sure a reputable bank or credit union, even a local one, is issuing the card. And, do not automatically assume a bank that issues the card.

Not all issuers report to the three major credit agencies (Experian, Equifax and TransUnion). It is important to get a card that refers to all three companies; Otherwise you will be wasting your time. Fortunately, secured cards normally report to credit agencies just like unsecured cards (you should check this before applying).

If you have filed for bankruptcy, you may need to wait until it has cleared before qualifying secured card.

Take only if you can not get standing, since you have no credit record; Or if you have poor credit. Plummer says: "Many companies will not even count them as credit, such as automobile F & I (Finance and Insurance) people, but will not admit it." So unless you really need a secured card, you do more harm than good.

Finally, whatever situation you are in, no credit or bad credit, the best way to build good credit is to create a budget and then stick with it.

1 You can pay membership fees to each of the three credit bureaus - Experian, TransUnion, Equifax and, to be able to check your credit score online daily. Visit our Credit Information section for more details. Tom recommends purchasing Microsoft Money 2004, which comes with one year membership to Experian (value $ 99.00).

2 To learn more about correcting errors on your credit report, read our article How to fix Mixed or Split Credit Reports.





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