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Archive for the ‘Secured Credit Cards’ Category

Before applying for a secured credit card, it is good to be familiar with the different types of cards that are available to make sure that you get the one that will suit your needs. Some of the most common types include the Standard Credit Cards; this one allows a customer to have a revolving balance up to a certain limit.

In this case, funds are deducted once a purchase has been done and once it is repaid the funds are made available once again. In case a customer has not cleared the balance by the end of the month, and then a finance charge is raised. These types have a minimum payment period that must be met by a certain due date that has been set if not, a fine is charged. Insensitivity and benefit that go beyond that of normal cards are offered by premium credit cards.

It includes Gold and platinum which offer reward points, cash backs etc. They come with minimum requirements and also they have a higher fee than the rest. The common factor between standard and premium is that they both offer zero percent interest cards, student card and many more. Charge cards on the other hand do not have limit.

This means that, at the end of every month a customer is supposed to have cleared the full balance. Failure to which affine is charged or the card is subjected to cancellation depending on the card agreement. There is nothing like minimum payment or finance charge when it comes to charge cards since the balance is supposed to be paid in full.

The other type is the Limited Purpose Card. This type of card can only be use on certain areas. An example of where payments can be settled using limited purpose cards is in terms of store and gas card. This is because it can only be used like credit cards with minimal payment and financial charges. The only card so far that needs the owner to first of all, load money on it before using it is the Prepaid Credit Card.

After purchase funds are withdrawn directly and it doe not matter how much there is because one purchases according to what one has.

Many smaller banks have been offering credit cards designed specifically for people with bad credit. You may think that it doesn’t make sense to offer them to people with bad credit, but when you look at the charges involved, you’ll see that it actually makes very good sense for the issuing bank. Of course, it’s not usually a good deal for the consumer.

How do these credit cards work? Well, if you have bad credit, that means that there have been bills that you have failed to pay. When you have a history of not paying your bills, most banks will see that there is a high risk of you not paying them, also. But some companies specifically target consumers with bad credit.

What they do is charge very high interest rates and fees. Most of these cards are more like secured cards. Most of them don’t actually make you send cash in to them up front like a secured credit card, but they tack this hefty fee onto the balance before you even receive it. What this means is that if the company offers you a $300 credit limit, and they charge a $50 annual fee and a $200 participation fee, you would only have $50 in available credit when you receive the card. This is money that you never get back, which means that even if you eventually run the card up and don’t pay it, the company has already made a profit on you, provided that you have made payments before you run the balance up. The only ways these companies could really lose money is if you spent the $50 in available credit and then never made any payments at all.

These cards may seem like a great deal, because you’re getting one that reports on your credit report as an unsecured credit card, but the fees that you end up paying actually make them a pretty bad deal. You are much better off taking out a secured credit card at a major bank than you would be to take one of these bad credit cards.

The only real benefit to accepting one of these offers is if you truly cannot afford to put the minimum deposit into a secured credit card. Of course, if that is the case, you may not be able to make the payments on your unsecured card, either, so you might want to avoid credit altogether until your income is a bit higher.

If you are young and are looking for a good way to build credit, a secure credit card may be a good option. Secured credit cards are also good for older people who have never established credit. Getting credit is difficult if you don’t have any. Many lenders will attempt to look at your credit report to determine whether or not you qualify for a loan. If you don’t have a credit history, they may not take the risk of lending you money.

This can put you in a difficult situation. It is very difficult to function in society without having good credit. Getting a car, house, or job will often require a credit check. Because of this it is important to have a solid credit history.

How Do Secured Credit Cards Work?

While there are many ways you can establish credit, the most common method is to get a secured credit card from a company which offers them. As the name implies, this type of card is secured by using the money you deposit in the account. The money will stay in the account as long as you use the card. The card will have a balance limit on it which will not be more than the deposit you made. Once you have made a deposit into the account, you will be able to use the card just as you would with any credit card. Secured credit cards are secure for both the lender and the borrower.

Zero Risk For Your Credit Card Company?

The credit card company lowers its risk by only lending money which can be secured by the money deposited by the borrower. It helps the borrower because they avoid taking on a large amount of debt that they may not be able to handle. The secured credit card has many similarities to a regular credit card, and you will receive a bill every month. These cards are different from prepaid credit cards which do not have an account which is used to secure them. Most prepaid credit cards are very similar to debit cards, and you cannot build a credit history by using them.

Building Credit By Spending

You will begin building your credit report as you use the secured loan to make purchases. Though you can use your secured credit card for as long as you want, most people eventually switch to an unsecured credit card. Secured credit cards tend to have much higher interest rates than unsecured credit cards, and they typically don’t have an annual charge. With secured loans, a portion of your money is locked in an account and you are not able to access it; this isn’t a problem with an unsecured credit card.

Step Up For An Unsecured Credit Card

At the same time, having an unsecured credit card requires you to be responsible. You should only get this type of card if you’ve consistently made payments on your secured credit card with no problems. If you find that you have been late making payments, it may be best to continue using the secured credit card. You don’t want to put yourself in a situation where your debt increases.

Secured credit cards are great for young people who are just starting out. They carry a low amount of risk; this is something which benefits everyone. Since secured credit cards have a much higher interest rate than unsecured cards, you can expect to pay more in interest when using them. Those who are looking for low interest rates will want to look at unsecured credit cards. These cards are aimed at people who have built up a good amount of credit, and have demonstrated that they can make payments on time. Building up a solid credit history is an important part of managing your finances.

There are just a small amount of major credit card companies and they are Visa, MasterCard, Discovery and American Express. There are large amounts of lending institutions that will issue credit cards and almost all of these companies offer the consumer the secured credit card. The major lending institutions are normally banks that are major banks with a large amount of depositors. That is why it is important that these banks make sure that when they issue credit that they will not only get all their money back but make a profit from the loan.

The bank lending institutions know that it is loans that help them to grow and prosper. It is important that they make a loan to someone who will make a great effort to pay back because soon the bank would go broke. The economy has changed the ability for most banks to make loans. That is why the secured credit card has become the number one credit card today.

The card provides a guarantee not only to banks but to other lending institutions like credit unions and private concerns. A consumer must make a deposit into the savings account of whatever lending institution they are getting their loan from to secure the loan. This is a loan so it does mean that you must pay them back with interest and perhaps a membership fee. You need to check and make sure that you are not paying back the bulk of your loan in order to be able to have some of the loan to spend. A great thing about this type of loan is the fact you can build your credit score so that someday you will be able to get an unsecured loan.

If you have credit challenge one of the best ways to reestablish good credit is through prepaid or secured credit cards. Responsible people that once had good credit can take important steps to better their credit score by using these two types of cards. They have become very popular by a growing segment of the population.

SECURED CARDS

Cardholders that use this method will deposit a sum that usually exceeds the stated credit limit established by the issuer. This serves to create a good payment record which is critical in rebuilding your credit rating. If payment is not made the issuer can take funds from the account and is protected. One might ask “if I have the funds, why use a credit card?” Remember, we are trying to improve our credit score and this is an excellent method to achieve that goal.

PREPAID CREDIT CARDS

A prepaid credit card is similar to a secured card but in reality is not a credit card at all. A prepaid credit card acts more like a debit card, funds are taken from a prepaid deposit. One advantage over a secured card is there is no preset limit. You may deposit any amount in the account and draw up to that amount. Repairing bad credit is the goal here and many issuers offer these cards because of their low risk. Set up fees and monthly fees may apply so survey the market. Watch the fee structure so you do not end paying a large percentage in annual fees. The fine print is sometimes over looked by a consumer but in this case it should be closely read.

These types of cards are excellent for responsible high school students and college students away from home. Spending can be controlled and the student has a leg up on establishing credit. Your son or daughter will be very thankful you helped them do this after they graduate and apply for a standard card.

Credit card spending is something that the majority of consumers actively participate in. For some it’s a matter of convenience. It’s easier to use a card than worry if you have enough cash. Card purchases offer some recourse to the buyer/consumer if they feel they didn’t get what they paid for. The charge can be reversed by the company. If you struggle to make the minimum monthly payments on your debt total each month, that’s a warning sign you may be heading for a debt crisis.

When it comes to credit cards, there are basically two types available today. They fall into these categories: secured and unsecured. The exact credit cards you are eligible for will be dependent on your credit history.

An unsecured card is issued to consumers with (at least) a good rating. The ‘perks’ that are attached to it, also depend on one’s score. Financial institutions determine the limit on each card after reviewing things like: debt to income ratio, time on the job, number of open accounts, late payments and missed payments. The better your score the less interest and fees you’ll pay and the higher the credit limit.

This type of card typically carries a lower interest rate and fewer miscellaneous fees than a secured credit card. You do not have to pay anything upfront, other than an annual membership fee, and that can often be waived.

On the other hand, a deposit of some sort is required in order to get approval for a secured card. Usually, this deposit will be equal to the limit issued which can range from $500 to $1000. Although, in some cases the limit will be higher. It depends on the applicant’s credit worthiness. The deposit is not used to make any monthly payments. Don’t expect the creditor to do so. It can’t be withdrawn for emergencies as long as the account is still open.

Secured cards are issued to consumers with a fair to poor credit history. Individuals who have gone through a bankruptcy are typically eligible as well.

These cards have very high interest rates and higher fees attached to them. But, most consumers are more than willing to pay these extra fees, in exchange for a second chance at building good credit. Sometimes a secured card is the only option. A business accepting a secure card can’t tell by looking at the card that it is secured.

Many banks refund the initial deposit, after a pre-determined number of on time payments have been made… usually between 12 and 18.

Making timely payments will go a long way, when it comes to re-building credit. It is recommended that a secured credit card be used sparingly, to avoid repeated problems. Use it enough to re-establish your credit but make sure you make the payments on time every month.