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. Every day he checks your credit score and sees slowly improving.

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

2 - The secured card is an important tool in the process 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'll earn even a little interest, as 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, not debit card. If it is full payments every month, then charged an interest rate of the rest. And the lending institution uses the money for security for the repayment of the debt only as a last resort. Even if the card is safe, it is 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 most useful for the person who starts their credit history, after saying that the person intends to take the extra step to Credit creation. "

Restoration of 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 qualify for an unsecured card. If you had to declare bankruptcy, however, may not qualify to be discharged.

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

Useful for transactions requiring a credit card. Hotels and car rentals require a credit card. If you do not qualify for an unsecured card, but do it 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 the bulk 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 out for hidden charges such as "registration fees" and "installation costs."

Interest rate. Just because you have no or poor credit does not mean you have to settle for the higher rate. Interest rates for attractive secured cards should not exceed 19%. Shop around and get the most competitive rate 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 make sure that no further harm your credit.

Fraudulent bids. As with unsecured cards you need to watch out 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 to get you credit. Before deciding whether to give you a credit card, legitimate credit providers examine your credit report.
* A call number '900 'for a credit card. You pay for calls with a prefix of '900 '- and you can never get a credit card.
* The 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 information yourself 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 continue taking things slowly. Using a secured card will help you learn healthy habits so that when you do get an unsecured credit card you remain in 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 the link titled "cards to consumers with poor or no credit."

Other Tips

Tom recommends sticking with only one or two cards and the costs are kept to a minimum. The goal is to pay the card off every month.

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

Make sure you 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 issuing the card.

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

If you have filed for bankruptcy, you may need to wait until it has cleared before you qualify for 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 businesses do not count on even 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.




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