Secured Credit Card Proven Way to Rebuild Credit Faster
A Secured Credit Card is a proven way to re-establish credit faster. It doesn’t matter if you have bad credit. All you have to do is put up a set amount of money as security a deposit (usually a few hundred dollars or more).
The good thing about it is that the funds that secures your card is still your money. It is basically just there as a safeguard/security for the credit card company – just in case you default on the card.
If this occurs, they will use that security deposit in order to recoup their loss. And on the other hand, if you ever decide to close out your account (in good standing) then your deposit is to be returned to you.
Your Security Deposit Sets Your Credit Limit
So for example: If you apply for a secured credit card with a $300 security deposit, the credit card issuer will usually match that amount in credit extended to you. You can in essence control how high or low your credit limit will be by putting up a larger security deposit. Sometimes secured card issuers will give even you a larger credit match than your deposit amount.
However, in a bad credit situation it is usually always 100% match – at least starting out. If you continue to manage your card in a responsible manner, your card issuer may decide to extend you credit over & beyond your deposit (this would be an optional decision on their part.)
No One Will Ever Know
Another thing about a Bank Secured Card Account is that it works just like any other credit card. Nobody will ever know the difference except for you and the bank that issued the card of course.
Also as you continue to make positive on-time payments, you could eventually qualify for an unsecured credit card. Making the transition from a Secured Card to an Unsecured Card can position you for better rates than if you were to apply for an unsecured card straight out the gate.
Unsecured & Secured Credit Card Comparison
Usually an Unsecured card has lower rates & fees than a secured card. But in a bad credit situation the scenario is sometimes the complete opposite. With bad credit, Secured cards will most likely win with the lowest overall fees. But not always – so be sure to compare when choosing.
One important factor that both secured and unsecured credit cards share is that both typically report your payments to consumer credit reporting agencies: Experian, Equifax, and TransUnion (they usually will report to one or all of them.) This will give you an opportunity to re-establish your credit.
(If you make the choice to get a secured card, Be Absolutely Sure that the company will report your positive payments to at least one major credit bureau –- if not it will do Nothing to help you re-establish your credit.)
You may be required to set-up a special savings or checking account in order to qualify for a secured card. This will be used as the designated account that your security will be kept in. A good thing is that typically you can set it up in an interest bearing account. Therefore, your security deposit can grow while it’s sitting.
Also be advised that in addition to your security deposit, secured cards may require an annual fee — and possibly a set-up and processing fee as well. These factors may vary from card to card.
Overall a secured credit card is easy for people with credit challenges to get approved for, and it can help you rebuild your credit faster!