Secured Credit Cards

If you’re credit score has plummeted recently, you will find that it is extremely difficult, although definitely not impossible to get a credit card.

It can be done, just expect to pay colossal amounts in fees and monthly charges.

The thing with getting a credit card with a bad score is that the industry thrives upon these people, so desperate to get a line of credit that they will overlook the horrible terms and conditions of these credit cards that often times just make their financial situation a whole lot worse than it already is.

When you have a low credit score and are looking to get a credit card there are normally two options available to you – a subprime card and a secured card.

Although consumers are fooled everyday, a secured credit card is definitely better than a subprime card – almost under any circumstance.

Subprime cards are never really a good idea, and they normally charge ridiculous amounts in fees and maintenance charges.
But many people do not realize this.

A February 27, 2007 article by Gregory Taggart of Bankrate.com, “Nobody’s ready for subprime time,” discusses the drawbacks to taking out a subprime credit card and how taking out a secured card is the way to go.

“Why would consumers who have debt trouble opt for a fee-laden subprime credit card rather than a less expensive secured credit card? ‘Marketing. Marketing. Marketing.’ That’s how Travis Plunkett, the legislative director of the Consumer Federation of America, responded when asked the question. According to Plunkett, subprime credit card issuers are wizards when it comes to identifying customers who are so desperate for a credit card that they’ll apply for a card even if it’s against their best interests.”

The people behind these cards know how to prey on people to make them believe that a subprime card is their only chance, when in fact that is not true at all.
The catch with these cards is that most of the fees eat up the majority of the beginning available credit limit. A typical subprime card will start out with a $300 limit but will have a medley of fees including processing fees, annual fees and maintenance fees, just to name a few.

If you find yourself in a situation where you can not get approved for a regular credit card, you are much better off skipping out on a subprime card and going with the much more economical secured credit card.
There is no sense in paying all of those subprime fees when there are other options out there.

“What desperate consumers don’t seem to know is that there is a better way. So-called secured credit cards cater to the same risky market, using a better model and at a much better price. They’re called ‘secured’ because the card’s credit limit is secured by a savings account of equal or greater value opened at the issuing bank. For example, if you apply for and receive a $300 credit limit, the bank or credit union will expect you to deposit $300 into a savings account.”
The secured card is clearly a better choice when pitted against a subprime card. Do your research and look into a secured card as a good way to help rebuild your credit.

Unsecured credit cards offer a simple means to build up your credit history since no collateral is required to use it. Yet, if you have bad credit, the chances of getting approved for a unsecured credit card are virtually nonexistent.

If this is the case, there are other options to consider, such as a secured credit card. Secured credit cards differ from unsecured ones in that they require collateral in the form of a cash deposit, which is placed in a savings account administered by the card issuer.

Payment histories on unsecured credit cards are watched by three different credit bureaus. Secured credit cards are not always monitored in this way or even report their payment histories. The policies on these types of cards will depend upon the individual credit card issuer.

Another advantage of secured loans is that they can help you raise your credit score. To take advantage of this benefit, you must choose a card that has its payment history reported to credit bureaus. Normally, the credit card application for outlines the benefits. If they do not mention anything about payment history, then you should contact the card company’s customer service division for more information.

You can raise your credit score with little trouble. All that is required is to use the secured credit card to purchase items and pay off the balance on time. With secured credit cards, you have a few differences between them and standard cards. One example, involves taking money from the monitored savings account and applying it to default payments.

Generally, the approval process for a secured credit card is remarkably easy. There is far less hassle with these than any other credit card. The fact that your source of collateral is the money you put in the savings account eliminates the need for credit checks. There are two restrictions however to getting one of these cards. You have to be 18 years or old and you must reside in the United States.

The credit limit on your card is based directly on the cash deposit in your account. If you want to increase that limit, all you have to do is add more money to the account. Additionally, the money in your savings account will earn interests provided there are no defaults on payments. One of the biggest advantages of secured credit card is this limitation of funds. This means that you can avoid the dangers of credit card debt since you do not spend more than you have.

If you happen to be one of the millions that have bad credit or none at all, then a secured credit card may be the best choice. If you use these cards regularly and are able to pay promptly and on time, you will begin to see increases in your credit score. Eventually, you might qualify for better rates and more options.