Secured creditcards
There are a number of banks that offer secured credit cards. These cards are given against a cash deposit and serve as a line of credit for that particular account against which it has been given. Here we will be seeing how do these cards work and its advantages and disadvantages.
How do secured credit cards work ?
Secured credit cards work on the simple principal that when you deposit money into your savings account you can use these cards and your limit is same as the amount of money in your account. These cards serve to be helpful to people who wish to rebuild their credit after having faced a recent bankruptcy or are suffering from bad credit problems.
Once you have decided on the secured credit card that you want you can fill out the application form. Most of the times you would have to pay a processing fee, which is paid with the deposit. Once these formalities are complete you can get the secured credit card via mail. Once you start using this card the provider bills you monthly for the purchases that you make with these cards and your payments are promptly reported to the credit bureaus. Gradually you would see that your credit score will improve.
Pros and Cons of secured credit cards
Some of the advantages of these credit cards include:
- They are a good way to rebuild your credit score
- Overspending with these cards is limited as your credit limit is restricted to the deposit.
- Almost all secured credit cards report your account to the major credit agencies.
On the other hand there are a few disadvantages also related to these cards like:
- High account fees that include application or processing fee, maintenance fees.
- Higher interest rates.
- There are some cards that do not report your accounts to the credit bureaus. Hence before applying make sure that you have verified this feature.
- Require deposit to open an account ranging from $200 to $5,000.
- There are some cards that can restrict your credit limit to 50 percent of the deposit.
Using secured credit cards effectively
When taking secured credit cards you should make sure that you read the fine print carefully as it carries some very important information, you should choose a card that gives you low interest rates and low fees on the deposit. Also make sure that you pay off your balance every month and pay your account every month.
There are a number of banks that offer these cards make sure that you compare offers before applying. Some of the banks giving these cards are mentioned below:
New Millennium Bank Secured: Annual Fee: $59.00/yr, regular APR: 19.50%, allows balance transfers, reports to three major credit bureaus.
Bank of America Secured Visa Platinum: Annual fee: $29.00, regular APR: Prime +10.99%, reports to major bureaus.
UltraVX Visa: Annual Fee: $83.40, monthly fee: $6.95; regular APR: 14.90%, reports to major bureaus.
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