What Should You Know About Secured Credit Cards?

By Author: Jennifer Baxt
Total Articles: 200
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If you have had a troubled credit history, then there is the chance that you will be denied the usual credit cards when you apply for them. Typically, if you have a credit score of 600 and above, you can get a credit card without a problem. If you have a credit score of 500 to 599, then you may be able to get a credit card, but you are going to pay a high interest rate. If you have a credit score of 499 and under, then you are typically going to be refused for a credit card, and this may present a problem. First of all, if you are trying to rebuild your credit, then you need a credit card because a diversified amount of credit helps your credit score. If you can't get the credit card, then your credit score suffers. As well, we live in a credit age, where many things are available through the use of a credit card, particularly online. To order anything online, nine times out of ten you need a credit card. If you don't have a credit card, you can find yourself severely limited.

So, what options are there for you if you have bad credit but need a credit card? There are not many, but the best option you have at your disposal ...
... is a secured credit card.

A secured credit card is a credit card that you have secured with a deposit amount that you place on the credit card. If you want a certain credit limit, then you need to deposit between 50 and 200 percent of that money onto the credit card. For example, if you want $1,000 on your credit card, then you need to deposit between $500 and $1,000. However, there are some companies that will allow you to deposit $100 onto a secured credit card to have a $1,000 credit limit.

Even though you made a deposit, you are still expected to pay monthly payments. The money does not come off the deposit, but off the credit card. However, if you find that you are about to default on what you have spent on the credit card, you can use the deposit to pay it off, but you will most likely lose the credit card at that point.

The main advantage of having a secured credit card is that if you have bad or no credit history, your history on the secured credit card is reported to the credit bureau. Therefore, if you make regular payments and show yourself to have good payment habits on the secured credit card, you will improve your credit score as a result.

Once you close out the credit card after you are done using it, as much as years down the road, you will get the deposit back on it.

If you have a poor credit history and want to improve on it, then your best option is a secured credit card. It costs you money at first, but it can greatly improve your credit history and score.

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