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Secured Credit Cards Explained
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Credit cards, loans, insurance policies have become the very essence of modern life. Growing up is not about enjoying the liberties anymore but about taking up the responsibilities that have been heaved upon every individual who wants to achieve higher living standards and status.
Each of these monetary adjustments or financial supports comes with its own pros and cons and its own deep end variety to meet the needs of variant consumers. Take a look at secured credit cards for instance. These are quite different from the regular credit cards and work similarly to secured loans.
What are Secured Credit Cards?
Consumers with bad credit record or those having no credit backing at all can go for secured credit cards. These cards are opened when a deposit is placed by the consumer, which acts as a security or collateral against the transactions made through the credit cards in the future.
In simple terms, secured credit cards are a good opportunity for people who have been failing in the past to maintain a commendable credit history. With the deposit being placed in a savings account, sometimes an interest bearing account, the credit card provider has the surety that the consumer won’t be able to default or file bankruptcy.
What Happens if You are Unable to Make Repayments?
In case, the consumer is unable to make minimal monthly payments against the purchases made through secured credit cards, the interest starts to build up on the balance and the institute can even use the deposit to pay off the debt amount, as a last resort. For this reason alone, secured credit cards are generally easier to open as your collateral stands as the best assurance that you are going to pay back.
How Can Secured Credit Cards Help Improve Your Credit Record?
Secured credit cards are usually opted by people who are sufferers of bad credit record and history as these don’t require a credit check but a deposit against the credit to be borrowed in future. So, here is how these credit cards can help you improve your credit record.
• A Chance to Improve Your Credit
Because credit cards and loans are not offered to people who have bad credit history, secured credit cards provide another shot at improving credit record. Since the main requirement of these credit cards is to make a deposit, mostly anyone who has enough cash to make a deposit can open this credit card and by managing the payments on this card, the consumer can improve his credit history once again.
• A Chance to Improve Your Spending Habits
The credit limit offered on secured credit cards is usually a percentage of the deposit that is made to the savings account. So the preset limit on the card cannot be exceeded. If bad money spending habits had brought you into trouble the last time you had a credit card, then the secured credit cards will help to keep your money spending in check.
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