FinancialPlanningAdvices.com » Credit Cards & Checking Accounts Advices » Secured Credit Cards Overview

Secured Credit Cards Overview

Despite their limitations as a type of credit cards, secured credit cards remain a great tool for building up a positive credit history. Many experts advise on their use if you lack credit card history or have such, but of a poor quality.

However, you should make a careful research before jumping into one of them. Here are some of the factors that you should analyze in order to choose the right secured credit card offer for you:

  • Eligibility requirements

    Each company has its own secured credit eligibility requirements. Some of the most commonly met include:

    • age requirement
    • income requirement
    • checking or savings account with the company
  • Secured card costs

    Before you apply for a secured credit card you should study the underlying costs, such as:

    • annual fees
    • application fees
    • processing fees

    You should not apply for a card that has high fees.

  • Deposit requirement

    The nature of secured credit cards includes the placement of a deposit in the account you open. In case of a default on payments, the amount will be withdrawn from the deposit. Some companies will withdraw from it on the first late payment you make, whereas other will do this only if you are late several months. Thus, you need to examine the conditions under which your issuer will withdraw money from your account.

    Some companies allow for the accumulation of interest on the deposit you have placed.

  • Credit limit amount

    Some issuers will impose you a limit equal to the amount of the deposit you have placed. However, other may impose you a credit limit equal to a percentage of the deposit, which wouldn't be the greatest terms you can get.

  • Annual Percentage Rate (APR)

    If you carry balances beyond the grace period you will be charged an annual percentage rate (APR). The finance charge you will incur is in linear relation with the interest rate you are charged, meaning that the lower the latter is the lower the finance charge will be as well.

  • Unsecured credit card conversion

    After a specific time has passed during which you have made your payments on time, the best of the secured credit cards will include the possibility of converting into regular ones. The latter come at lower interest rates, fees as well as restrictions.

  • Reports to the credit bureaus

    If you want to build a good credit history you have to check out whether your payments will be reported to the three major credit bureaus. The failure to do so will not have any effect on your credit score.

Having these advices in mind it is time to make your decision on the secured credit card that will make your way through the building up of your good credit record.

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