What is a secure credit card?
A security card is a credit card that requires you to deposit a certain amount in a savings account, money market account or certificate of deposit. The minimum amount is usually between $200 and $500, but this will vary from company to company. Your deposit is considered as your safety, and some card issuers even allow deposits to earn interest.
The amount you deposit in your account is your credit limit. You should understand that sometimes the limit is the total amount you deposit in your account, but in some companies, the limit may be a percentage of your total deposit.
A secure credit card is not a debit card. It is important to understand this, because if you don't pay in full every month, you will be charged interest on the unpaid balance.
Who should consider using a secure credit card?
If you don't have a credit history, using a secure credit card is a good way to establish credit. Many young people who are just starting out may choose this as an option.
If you have bad credit, you may want to use a secure credit card to help you improve your credit score. In addition, a secure credit card may be your only source of credit card. Some transactions require a credit card. This may include car rental or hotel reservation. If you need to do these types of transactions and you can't get an unsecured credit card, this may be the only way for you to get a real credit card.
What to look for in a secure credit card:
Interest rate: Don't be fooled into thinking that because you don't have a credit history or a bad credit report, you must solve the high interest rate. Before applying for a secure credit card, be sure to shop around and find the lowest interest rate you are eligible for.
Fees: Pay close attention to any fees that you or your account will be charged once your account is opened. Some companies will charge very high fees and even reduce your initial deposit before you use the credit card. Stay away from those companies. Look for companies that don't have any fees, or those that charge a small fee to open an account at one time. The annual fee for attractive security cards is usually between $ 20-35.
Scam: Unfortunately, some companies specialize in blackmailing people. They take advantage of the weakness of those who may fall into the credit crisis. Some things they do include promising you a "quick loan". Another popular scam is to ask you to dial 900 phone numbers to get the "secret" of credit card or credit repair. Your telephone company will charge you a high fee for using the 900 number, and you will never get the information provided.
The best advice to avoid secure credit card fraud is that if it sounds too good to be true, it is true. Use your common sense and don't be cheated by these swindlers.
Credit improvement: Even if your security card has a good payment record, it will take you several months to see your credit record improve. You must be patient when repairing bad credit. You must also be smart. Make sure that the company that issued you a secure credit card will report your good payment record to the three major credit reporting agencies. Not all companies report it. If they don't, you are just wasting your time.
Remember, if you don't pay on time, they will also report your bad payment record. Be careful and pay on time every month.