Many people struggle with bad credit history for different reasons. If you are in the same situation, is there an easier way to solve the problem? Can a secured credit card help you to recover from bad credit and regain a good credit standing?
What is a secured credit card?
A secured credit card is a type of account offered to customers with bad credit. Despite an unimpressive credit history, issuers of secured credit cards grant easy approval as long as they can submit a security cash deposit. This gives secured cardholders the chance to use a credit card and the opportunity to rebuild their credit history.
Just like a regular card, it can be used for shopping at malls, groceries, diners, boutiques, gas stations and other establishments. It can be used for making purchases from the internet as well. Secured cards are accepted anywhere credit cards are accepted. In addition, no one has to know that you are using a secured card because you have bad credit history.
The Difference of Getting Secured Credit Card
Unlike a regular credit card, your credit line will depend on the value of your cash deposit. Some credit card companies require a minimum of $300 cash deposit while other issuers require higher minimum cash deposit starting from $500. If you need a higher credit line, be prepared to submit a higher security deposit.
Choose a secure card that will report your payments to the major credit bureaus as it is the only way to rebuild your damaged credit. Thus, as you use your card for your expenses and make your payments on time, you are taking a step towards good credit.
After a few months of consistent payment, you can request your credit card company for an upgrade to a non-secured account. There are issuers that automatically provide an upgrade after a year of regular payments. Before signing up for a secured credit card, make sure that you clearly understand its provisions on credit repair.
Be a Wise Secured Cardholder
To successfully use a secured credit card for rebuilding credit, keep your spending minimal. This way, you can be sure to pay off your balance in full each month. Remember that secured cards have higher interest rates and the only way to avoid them is by zeroing in your monthly balance.
Never miss your due date of payment. If for some reason you cannot make your payment on time, call your credit card issuer right away and request for an extension of your deadline. Don’t forget to request your issuer not to report your late payment to avoid hurting your credit score. Nevertheless, this is an option that you can try only for emergency. Once you use your card for purchase, pay it off as soon as you can.
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About the Author
Shelly Evans is a freelance writer and loan consultant. She specialize in providing Bad Credit Resources for those who are in need.
I wonder how often secured credit cards are “written off”. Meaning, how often the creditor says “I have your money and now I’m keeping it because you’re not paying”.
Great article!
well here in the US its in the terms of service that if you don’t pay on your secured credit card they will keep your security deposit. Thats why most of them make the credit card limit equal to the amount they kept as security. My best friend had a secured card for about a year before it became unsecured. Shelly made all the payments and they made her card unsecured and offered to leave her security deposit in their bank in a newly formed savings account or mail her a check. She opted to get the check. I think anyone trying to rebuild their credit can’t go wrong with a secured credit card. If they plan on defaulting on the debt secured credit cards are not the way to go. Liz