Secured Credit Card

What is a secured credit card?

A secured credit card is a guaranteed VISA or MasterCard and is secured by a deposit to the issuer's bank. It works simply as a credit line that you fund for yourself with your own cash. To get a secured credit card you have to deposit on the issuer's bank account an amount ranging from $250 to $3,000. Then this bank will send you a credit card. Their rules differ but usually you can use your credit card up to 100% of your deposit.

Secured credit cards are sometimes the only way for individuals to more or less quickly establish or repair their credit. The acceptance is practically guaranteed, after all you are putting your money where your mouth is and don't fret, there are some fees that secured credit card issuers will charge you. Unless there is something truly disgusting on you credit report.

Establish credit with secured credit card

College students, foreign students, immigrants, ex-convicts, recently divorced or widowed and those perpetual "I have paid cash for everything since I turned 15 ..."  may find secured credit card very useful, if they are rejected by banks due to lack of credit or insufficient credit. If you use your secured credit card for a year or two, you will establish a nice ground to apply for far more credit.

Fix credit with secured credit card

If your credit is bad, than secured credit card is a solution for you. Whatever made your credit bad, late payments, collections, medical bills, credit counseling or bankruptcy, a secured credit card will help you to get fresh start. Again, using it for a couple years will restore some credit and help obtain more on much better terms.

How long I must stay secured?

The trick is to pay your secured credit card bills on time. We can't emphasize this enough. You must demonstrate your newly acquired ability to manage the secured credit card for at least a year. If you do you will be able to ask for an increase of your credit line or apply for a regular credit card.

What about credit limit?

Most banks that issue secured credit cards require you to make a deposit for, let's say $500, and that will be your credit limit.  Some, however, may offer much better deal that don't require a dollar for dollar match to open the account.

Where can I use my secured credit card?

Your secured card will look no different than a regular credit card. You can use your secured credit card to buy groceries and gas, book hotels, buy airlines tickets, etc.

Review the credit card terms with magnifying glass

When considering a secured credit card, you should closely review the terms. They tend to have annual membership fees, high annual percentage rates, and lame credit limit increases. If you miss payments or are late on payments or exceed your limit, you will have to pay significant penalties.

Epilog

Make your secured credit card payments on time. After all it is relatively easy to get one so put it to a good use and don't ruin what can be your best and last chance to correct your credit.

If you're using your secured card to establish credit for the first time, you may try to get another card in six months. If you are using it to reestablish credit, it may take up to two years or more before you can apply for unsecured card, depending on how bad your problems were. In certain cases it can be as little as 6-8 months. Be patient, and make sure you take every step possible to build a good credit rating.

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