What if you could get easy access to credit when you need it the most?
For those with poor credit, it can often seem impossible to get a credit card in your times of need. This can make it seem like there is no way out from a spiral of poor credit.
Secured credit cards may be the answer to this dilemma. However, many people are simply trying to answer the question: “How do secured credit cards work?”
Fortunately, we’ve put together a comprehensive guide to secured credit cards. Keep reading to discover all of the answers you need!
We’ve put together a solid guide to how secured credit cards work. Before we go any further, though, we need to define just what these credit cards are.
These cards are “secured” by a deposit that you make to open them. As an example, someone can deposit $500 and then have a $500 credit card that is available to use.
That initial deposit never really goes away, and you can get it back if (or when) you cancel the secured card. In the meantime, you’ll have access to this money via credit card whenever you need it.
Ultimately, there are many crucial differences between secured credit cards and unsecured credit cards.
Unsecured credit cards are what most people think of when they hear “credit card.” These cards are “unsecured” because they do not require any kind of cash deposit or collateral to get approved.
Instead of using a deposit, these lenders rely on your credit score. And this is why many people end up using secured credit cards in the first place.
Sometimes, your credit may be poor (or simply young). This can make it difficult to secure the kinds of unsecured credit cards that you want.
However, secured credit cards offer a way to rebuild your credit (more on this shortly). In this way, they are like a stepping stone towards a better future for your credit.
How do you get approved for a secured credit card? Ultimately, this is up to the credit card lender.
You already know about the main requirement: making a cash deposit. And for some lenders, this is the only requirement for getting approved.
Other lenders may set up requirements such as having an active bank account. For such lenders, you might not be approved even if you are willing to make a cash deposit.
It’s good to shop around online and find a lender whose requirements will be easy for you to meet.
Like we said before, many people are interested in getting unsecured credit cards for bad credit. However, this leads to a natural question: just how do these cards play a role in rebuilding your credit?
Your credit score is determined by a variety of factors. This includes things like your overall amount of debt and how many credit accounts you have open.
With a secured credit card, you can limit yourself to a handful of small purchases each month. And (this is important) it’s best to pay the entirety of the card off each month.
This means you won’t carry any kind of interest balance from month to month. However, steadily using credit and paying off the card will help raise your credit score.
Over time, you’ll have enough credit to pursue the kinds of unsecured credit cards and loans you may need.
The best secured cards are ones that won’t cost you extra money. To ensure you don’t pay more than you have to, it’s important to watch out for fees.
Many secured credit cards have an annoying annual fee. This means that even if you pay off the card each month, you’ll end up paying a certain amount (like $50) per year.
While rebuilding your credit is great, you shouldn’t have to pay a premium to do it. Instead, shop around until you find a good secured credit card that doesn’t have any annoying fees!
Secured credit cards are very useful for many people. However, for most buyers, the eventual goal is to switch to an unsecured credit card.
You already know the first step of this: to use your secured card and build up as much credit as possible. But what are the next steps to take?
In some cases, the next step will be taken for you. Certain lenders will switch your secured card over to an unsecured card if you have used your secured card in good standing for a year or two.
Otherwise, you’ll need to apply for an unsecured credit card. You can apply online, and most applications will immediately tell you if you qualify or not.
One thing to look forward to is getting your money back. Once you officially cancel a secured credit card, the lender will return your initial deposit to you. And that can help you make the first payment on the unsecured card!
We’ve mentioned your credit score several times by now. But do you know how to find out what your score is and how to actively monitor it?
There are multiple free services that let you view your credit score. Furthermore, you will be alerted by these services each month to view the updated score.
This is a great way to see what your score is and figure out how it was calculated. And this is a great opportunity to brainstorm how you will further rebuild your credit.
Furthermore, these services let you know if your credit card is being misused. This can help you catch credit thieves and get them away from your account.
At the end of the day, information is power. When you know all about your credit, it’s far easier to maintain good credit!
Now you have an answer to “how do secured credit cards work.” But do you know who else has the rest of the answers you need?
At News 9, we’re bringing you all the news that’s fit to print and watch. To stay on top of what’s trending, check out our breaking news today!