Secured Credit Cards Worth the Hassle?

Secured credit cards are designed to help consumers who lack credit or that have bad credit score get their financials back on track. Applying for a secured credit card can be intimidating as there are many terms and conditions you should be aware of before committing to a card CVV SHOP.

The Low Down on Secured Cards

Secured cards are different than unsecured credit cards in that the card holder must provide a cash deposit into the card to be used as the credit limits. For instance, a secured credit card may require a $300 initial deposit. This $300 amount becomes the spending limit. Consumers spend against the credit limit and must replenish the account monthly in order to re-increase the credit limit.

Secured cards do not work the same. If you are interested in applying for a secured credit card, you have to do some research to ensure the card you choose is right for your financial situation. The most important step to finding the right secured card is to ensure the credit card provider will report your activity to the credit bureaus. Not all providers will and if you use an unsecured credit card that does not help to improve your credit, your efforts have been wasted.

You also need to pay close attention to the fees and costs of the secured credit card. You may find that you may pay a higher fee for a secured card than for a traditional non-secured card. These higher rates may be something you cannot afford. Many providers institute these fees because without a credit history you are a risky proposition to their bottom line.

Interest rates should be considered. You may be depositing $300 into the card account but will be charged interest for your purchases and card use. Your initial deposit may not stretch as far as you would like.

Benefits of a Secured Card

As long as the terms and conditions of the card are suitable to your financial situation, a secured credit card can help you boost a low credit score or establish credit if you lacked it in the past. You can utilize the secured card for a period of time as you get more established and often can transition to an unsecured card for later use.

The benefits of a secured credit card rely on you making timely payments and following the agreement set forth by the card provider. It can be easy to hurt your credit by using the card improperly such as making payments late or defaulting on the card altogether. You have to ensure you do not charge over your spending limit as you can hurt your credit and start a vicious cycle of debt you find it hard to get out from under.

Secured credit cards can help you establish a credit foundation, especially if you are young. For those that may have made credit mistakes in the past, applying for a secured credit can be one way to help recover and utilize your credit wisely moving forward. Remember, you should research your options before committing to a card. Selecting the wrong card can ultimately hurt you in the end so don’t apply for just any card offer coming your way.

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