It can be a little tough to carry on with life without a credit card. In addition to your own money, having an additional financial assistance is always good – as far as you want to keep it positive. From buying air tickets to car rentals and booking hotels, credit cards is becoming more of a requirement of our daily lives. Even when we have enough cash to make these regular purchases, credit card is often the preferred mode of payment to keep your savings secure.
Getting a Credit Card — Setting the Context
If you have been even a little messy with your credit payments earlier and have landed up on a bad credit score, it could become a little tough for you to get a credit card. Bad credit history often ruins your eligibility. In short, it is definitely tough to get a credit card with poor or no credit history at all. This is where people turn to a secured credit card.
A secured credit card is a great option for a lot of people who do not only want to qualify for a credit card but also improve their credit history in the long run to qualify for an unsecured credit card. It is an opportunity to fix a bad credit history to clean your record for good.
Why a Secured Credit Card?
Without a doubt, a secured credit card is a great way to bring back some positive impact on your credit history. While they may not be better than the regular credit cards, this one comes with the purpose of improving your credit history rather than giving you a credit limit for your future purchases. An amount is required by the creditors as a security deposit. It is usually equivalent or only little less than the limit on your credit card. This amount is usually returned when your secured card is converted into an unsecured one or when you decide to close that account. The only thing you need to focus here is to make sure you make timely payments throughout the duration and improve your poor credit history instantly.
But before you jump onto any conclusion and apply for a secured credit card, check out the questions below and make an informed decision.
Q. What Fees Do I Have to Pay for the Secured Credit Card?
The deposit should not be confused with the fees. It’s the money, which is returned if you close your account or get your card converted to an unsecured one. The money is kept by the creditor if you default on the secured credit card. However, it’s not the fees for applying the credit card. You might have to pay separate fee for applying and processing the secured credit card. It may also come with an annual fee.
It is important that you understand the fee structure before applying for the card. Always narrow down your list of creditors and compare fees before making any decision. Also make sure you go through the terms and conditions of the card before deciding which one to go with.
An expensive secured credit card is not a good deal. You are already paying a lot for that opportunity, so don’t go too overboard. The goal is to improve your credit report so you can easily qualify for a regular credit card. Stick to that goal.
Q. Is There Any Minimum Amount on The Security Deposit for the Credit Card?
This amount is often set against the credit limit on your secured card. This amount is usually kept in your account until you default on your payments. It’s only then when it is used by the creditor. The creditor will assign the minimum and maximum security deposit limits for you.
It is easier to qualify for a secured credit card that offers minimum requirement. This means that you do not have to deposit a huge amount of money to receive a credit card with the same limit. However, it also suggests that the overall limit on your credit card with be comparatively lower. But it is highly recommended to keep your limits low so you stick to making monthly payments without going default on it.
The system wants to ensure it is making it easy for you to improve your credit report. It does not, in any way, aim to make it worse for you.
Q. Is It Essential For You To Report Your Credit History to the Bureaus?
If your aim is to improve and rebuild your credit history, it is necessary that the payment history on the secured credit card is reported to the authorities. Credit card history and payments that are not recorded by the bureaus will not show up on your credit report. As a result, it will not offer you any benefit you have been looking for.
Secured credit card should be reported to improve your credit rating. Reporting to an alternative credit reporting agency will not really benefit you because the future creditors may not refer to any unreported history.
Q. Is It a Good Option?
If you aim to rebuild your credit score for better financial support in the future, then it is definitely a great idea to apply for one. It is important not to make the same mistake over and over again. Once you get this opportunity, make sure you make the most out of it. Stay focused and works on it responsibly to gain better results.
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