What we should know about secured cards?
With secured credit card, you have to provide security in form of cash or kind before being able to use the credit facility. Financial downfalls have made many people fall victim of below average or bad credit scores. As a result, they can not be approved for any credit facilities in the market. With credit card security, such people are allowed the option to deposit some form of security, mostly logbooks and cash, after which the credit providers extend credit to them.
For instance, if you apply for a secured credit card, with the credit limit set at $200, you are required to make a cash deposit of $50, before you start using the credit card. In other words, a secured credit card is a conditioned credit facility, which you need to meet some pre-determined terms before being approved for credit.
Difference between the secured and unsecured credit cards
The difference between the secured and unsecured credit card is basically that, the latter does not require any form of collateral to be approved; just your credit score and you are set for credit approval.
If used well however, a secured credit card might just be the perfect remedy for your damaged or not so good credit score. The fact that the banks and other credit providers are holding something that is yours makes you increase your responsibility on managing your credit. Especially with the consumer credit facilities, users significantly improve on credit usage. The best way to use your secured credit card is simple; first, ensure that you do not at any point exceed the credit limit set and secondly, that your credit card balance is always above the value of the collateral deposited. The credit limits are normally very low thus, very easy to forget and exceed it. Personal responsibility and utmost care is therefore vital while using a secured credit card.
Below are some of the features that stand out in secured credit cards:
- Requires a security deposit, either in cash or in kind.
- Highly acceptable globally.
- Credit limits are very low and increase with time.
Characteristics of secured credit cards
These are some of the unique characteristics of secured credit cards, common with most US banks and other major credit providers.
You may be wondering whether a secured credit is as important. The answer is yes, it is very important, especially if you are suffering from a damaged credit score. I highly believe and confirm that in pursuit of a perfect credit score, a secured credit card has many benefits. They include:
- Establishing and re-building credit score.
- Easy approval for credit facilities, which you could otherwise be denied if using, unsecured credit cards.
- Direct reporting to credit bureaus thus, good use of credit reflects in your credit report.
- Security deposit used incase of a default in payment.
A secured credit card is a sure way of rebuilding your credit worthiness, as there is more responsibility on your part and intense follow up by the credit providers. Most US banks and credit providers offer secured credit cards to customers as it is a less risky service compared to unsecured credit card service. It takes considerably shorter time period to process a secured credit card application, after depositing your security.
The financial institutions have come up with more complex security systems to ensure that there are fewer cases of fraud and also make it easier to transact using the secured credit cards. On the credit cards, there are credit card security chips, which are uniquely coded to enhance credit card security. In comparison to other credit providers, the most secure credit card provider is Capital One Secured MasterCard.
Without any doubt, we can firmly agree that, secure credit cards are what you need to rebuild or improve your credit score easily.