Secured credit cards are credit cards that are linked to a savings account. The amount you deposit in the account determines your credit limit. If you apply for a secured credit card, you need to provide cash collateral and your deposit amount serves that purpose.
You can put in more cash if you want to increase your credit limit. The credit card issuer will allow you to use either the entire amount or a percentage of the cash deposit. The credit limit usually varies from one credit card issuer to another.
Secured credit cards are best suited for people who have a damaged credit rating and are in the process of repairing their credit.
How much do secured credit cards cost?
The charges attracted by secured credit cards vary widely and you need to shop around for the same. Generally, you are required to pay an application fee. There are few credit card issuers that don’t charge an application fee. You are also required to shell out an annual fee.
How does a secured credit card help you in improving credit rating?
Secured credit cards allow you to keep expenses within limits and depending on your requirement you can control your expenses. It shows that you have made full payments, an indication that you are becoming financially responsible.
What are the drawbacks of secured credit cards?
Just as these cards can help you rebuild credit, they can also cause financial discomfort at times. The good thing about secured credit cards is it helps you to build credit. The darker side of it is that these cards attract very high interest rates and there are times when credit card issuers take advantage of your financial situation and trick you into shady deals.
Many credit card issuers give you a secured credit card provided you buy an insurance policy every month for a specified amount. This can be troublesome and you may not be in a position to shell out cash every month.
