Sponsored Links :

Secured credit cards

Secured credit cards are designed for those who want to build a new credit score or just trying to improve their bad credit. It can be a significant stepping stone in managing your credit history. The biggest difference between a secured and unsecured credit card is that secured cards require a security deposit from the cardholder which functions as cash collateral in case you miss on payments. Secured credit cards all work this way. You give a certain amount to the credit card company so that if you run into a trouble and not able to make payments, the company has your cash for repayment. Otherwise, a secured credit card operates just as a credit card would, with interest and, if you do not pay it off in full every month, revolving debt.

A secured card can help you get a decent credit score. If you have a miserable credit history going back years and years, complete with bankruptcies and debts in collection, it will take more time to make a good credit record than a person with no credit score at all. But there is a caveat, not all secured credit cards report to all the three major credit bureaus. You need to make sure, the one you are applying for does. If you get a secured card that does not report your credit history to the credit bureaus, you cannot build credit with that card.

Issuer companies are willing to extend credit of secured credit cards because the credit line is secured by a cash deposit which is provided by the cardholder. It guarantees that the bank will get repaid even if the cardholder runs into a trouble. If you will manage your account responsibly then after a period of time you can graduate for an unsecured credit card.

A secured credit card can help you to build or rebuild your credit history but you have to keep few things in your mind. Always pay off your balances in full and on time. It does not mean if you are using a secured card you will not face any financial challenges. You can still get into trouble with a secured credit card. The downer for this card is, the card may have high fees, and the line of credit will likely be small, as it limited to the amount of money you use to open the account.