Credit cards have become a necessity in today’s time and age. However, not everyone can qualify for a credit card due to financial limitations. For these individuals, getting a secured credit card is an effective solution.
Secured VS Regular Credit Cards can give you a big advantage for credit repair
A secured credit card is different from conventional credit cards. The biggest difference between these two types of cards is in collateral. Unlike regular credit cards, secured cards require you to hold money as the initial deposit. This serves as the collateral for using the credit card.
And just like a regular credit card, a secured cardholder must make monthly payments on time. If they default on their payments, the issuer keeps the collateral i.e. deposit. In addition, a secured credit card has a credit limit between 50% and 100% of the deposit.
Credit repair benefits of Secured Credit Cards
- As a secured credit card does not rely on an applicant’s past credit history, obtaining it is easy. However, those who have bankruptcy pending will face complications. Anyone can get be granted a secured credit card, especially if they do not get approved for a conventional credit card.
- A secured credit card is the best way to reestablish credit history. All payments are included in the credit report. Most issuers will report timely payments to the major credit bureaus. Hence, secured credit card holders make timely payments for some time before applying for a standard credit card. In addition, some secured cards also offer rental car insurance.
- With a secured credit card, individuals can earn interest on their deposit. This deposit is used only if a cardholder defaults on their payment. In some cases, secured credit card issuers place an individual’s deposit amount into a savings account. This gives card holders the perfect opportunity to earn some extra money – depending on the interest rate.
The secured card issuer keeps the deposit.Unless a secured card holder overspends their deposit amount, they won’t have to worry about payment defaults. Nobody will hound them for missing monthly payments.
- The same federal laws cover both secured and standard credit cardholders. In case of a secured card, a limit applies to a cardholder’s liability for theft. Individuals must request a chargeback in the event that goods or services that were paid for are not received.
Obtaining a secured credit card is a great credit repair strategy. It can prove to be beneficial for building a good credit score. For more information on building credit fast with a secured credit card, and other simple credit repair tricks, click here.