Build or Rebuild Credit with Secured Credit Cards
There is a vicious cycle that people get stuck in when they either have no credit or bad credit: no one wants to give them credit. Secured credit cards are rising in popularity for that reason.
Unsecured credit cards are based primarily on your credit score and history. The bank will then give you credit in an amount of borrowed money. It is called unsecure because the money is not tied to a possession or security deposit that the bank can retrieve if the balance goes unpaid.
The way secured credit cards work is by requiring a deposit that is a certain percentage of the amount borrowed on the card. For example if you make a deposit of $500, then your credit card limit would be anywhere from 50 to 100% of that $500.
Even though secured credit cards have a deposit, they still work like unsecured credit cards. Depending on the card there may be annual fees. As well, secured credit cards tend to have higher interest rates. Some credit card companies go so far as to charge additional fees, such as insurance that can be required in order to get the credit card. There are many different companies offering secured credit cards, so, before you say yes, look around for the card with the least amount of fees.
In order to really rebuild or build credit, it is important to use the credit card but pay off the balance in full every month. Also, some secured credit cards have options that allow you to get an unsecured card after a certain period of time.
Initially secured credits cards seem like the answer to all your problems; however, an article written by The New York Times discovered that people can still be denied. Each bank has certain requirements that they use in order to decide if you qualify or not. Before you apply for a credit card, it might be in your best interest to call the bank and see what the requirements are. Some companies will not allow you to get a secured credit card if you have been through bankruptcy, while others will look at the circumstances and when the bankruptcy occurred and decide on an individual basis.
There are also some credit cards that sound appealing because you can apply online, and they will let you know if you qualify immediately. In order to make sure the company isn't a scam and that the card will help you build your credit find out the questions you should be asking by going to this article:
10 Questions Before Getting Secured Credit Cards
Secured credit cards promise a great deal, but just like most things, there is always fine print. The most important part is to find out the good cards from the bad, so you can find a way to get on track with your finances.
Questions and Answers
Article Tags:
credit card debt
,unsecured debt
,free debt settlement
,credit relief
,debt calculator
,financial tools
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