You might have heard the term secured credit card, but do you know what it is? There are two main types of credit cards out there. They are secured and unsecured. Most credit cards that you think of are the unsecured type. This means that you are extended credit from a lender, such as a bank, and can use that credit however you like. However, to use it, you have to pay a fee, which is called the APR.
A secured credit card is a great option for those who have bad credit and cannot qualify for a traditional card. This instrument can help to establish credit when someone is new to the credit world. It can also help rebuild credit for those who need it..
Secured credit cards are different. They are primarily for people who have poor credit. There are many features and benefits that a secured card can give the consumer. It can be used short or long-term and can fit any individual need no matter what the financial circumstance is. Here, we are going to show the consumer why secured credit cards for bad credit may be the right choice for a card holder.
We have information about secured credit cards for bad credit, below:
What are Secured Credit Cards for Bad Credit?
Secured credit cards are those that require a collateral, or cash deposit. This deposit is then used as the line of credit for that specific account. Here’s an example: you apply for a secured credit card and then put $400 into the account. This means that you can charge up to $400. In other words, that account has a $400 limit. Some lenders allow customers to later add money to that initial deposit. Others reward good customers who have a consistent payment history with a larger credit line without any additional deposit.
What Else You Should Know About Secured Credit Cards
Now that you know what secured credit cards are, there are other things you should know about them before you start applying. First, these cards are not available from every bank or lender. So, you might have to shop around a bit. Also, if you choose to get a secured card, not only do you have to put your deposit down, you also likely have to pay an annual fee.
Speaking of the deposit, you might wonder how much you have to put down. Most secured credit cards for bad credit require a $300 to $500 initial deposit. Remember, that deposit is your credit limit, at least initially. Different companies have different policies for deposits.
The main reason people get secured cards is to help them build up their credit score. So, make sure to find out if the lender reports to the credit bureaus before you choose that card. If they don’t report, you won’t build your credit history. After using and paying the bill on your secured credit card, you should start to notice your credit score inching upwards. If you start getting offers in the mail for unsecured credit cards, you know that this method is working.
Is a Secured Credit Card Right for Me?
Secured credit cards are a good idea for many people, but not for everyone. For instance, if you need money right now, one of our personal loans is a much better option. Often it takes a credit card a week or two to reach you. A personal loan is instant upon approval, and you don’t have to have good credit to get one.
Using Secured Credit Cards For Bad Credit
A secured credit card requires a deposit before use. The deposit amount can vary, but this initial money determines the credit line. Therefore, putting in more money at first is going to yield a higher credit limit. In this case, we advise that an individual needs to do what is best for their particular situation. It is important to keep in mind that the credit issuer can take that deposit if proper payments are not made.
Approval is not automatic. The credit issuer still has to check credit scores to determine the risk of lending money. Once the requirements are met, it is up to the consumer to use the card with care.
Additional Features Of A Secured Credit Card
There are many pros to having a secured card. When payments are made, whether on-time or not, they are reported to all of the three major credit bureaus. This is instrumental in helping establish and increase credit scores.
Also, the secured card credit limit can increase after a period of on-time use. At that point either the consumer can add additional money to the card to increase that limit. It is even possible for the credit issuer to increase the credit line without any more deposits. Depending on the individual, that increased amount can vary.
How Long Should A Secured Credit Card Be Used?
Secured credit cards for bad credit are meant to be used just long enough to get credit from bad to good. Once a good credit score is established, a more traditional credit card option may be the best choice to take.
While a consumer of the card can always use it for as long as desired, remember the fees and charges may be higher than other now available options. We can find out the best opportunities for all types of bad credit consumers.
Using a secured credit card is a practical and worthwhile way to re-establish broken credit. There are many advantages to be had when using this financial option. Always take care when using the card. The goal is to increase credit scores in the timeliest way possible. On-time payments and a zero balance every month can get an individual there in no time.
A bad credit score, regardless of how it happened, not only can make it difficult to get approved for a loan, it can also sometimes make it hard to get approved for an unsecured credit card.
But the fact is there are many secured credit cards for bad credit applicants that can meet your credit transaction needs and give you a chance to rebuild your credit rating.
There are so many options out there, in fact, that you don’t want to look at them one at a time in a vacuum. You need to have the ability to compare all available offers in order to find the best secured credit card for bad credit that will fit your situation.
How Do Secured Credit Cards for Bad Credit Work?
The basic premise of a secured credit card is that you put forward a deposit, often the full amount (or a substantial portion at least) of the initial credit line on the card. Thus, you are largely or entirely, de facto, borrowing back your own money.
That obviously lowers the risk factor for the credit card company substantially, which is why secured credit cards for bad credit make a lot of sense on the credit card company side of the equation.
And on your side of the equation, it is a worthwhile enterprise as well. Why? Because you may need a credit card to make electronic payments on bills, order things online, to use while traveling, to make emergency purchases quickly, and to avoid the need to carry tons of cash with you everywhere you go.
And in most cases, if you make your minimum monthly payments on time consistently (a certain number of consecutive payments), you will see your credit limit raised, your interest rate come down, and eventually, your deposit appear as a credit to your card (or otherwise returned to you.)
How Do I Find the Best Secured Credit Card for Bad Credit?
If you’re looking for a secured credit card for bad credit, you can find a flood of options by running a simple Google search.
But to find the best option that matches your wants and needs, you need to quickly sift through those options. You need to intelligently compare them: and that takes detailed information and experience in knowing what to look for.
At Bonsai Finance, we have the tools and experience to locate all the secured credit card offers within our vast network that fit your specific criteria. We can also quickly determine whether you would likely be approved for a card before you apply and find cards that do not require a credit check to be run.
We understand the dynamics of how secured credit cards work, and we can help you make an informed decision.
Knowing is truly half the battle when it comes to locating and applying for a superior secured credit card. But you can’t spend all day researching credit card offers. Bonsai can make that process quick, simple, and easy.