Bad Credit - No Problem with Secured Credit Cards
When a person does not have a credit score that is sufficient in order for them to gain approval for an unsecured credit card, he/she may opt to take out a secured credit card. While these cards look and operate like a standard credit card, the difference is that the only credit received is a small percentage higher than the amount of money deposited to the account. For example, if someone opens a secured credit card with a $500 deposit, the credit limit would be about 90% of that amount to 150%, depending on how bad the credit score is. This means that a person with very bad credit would only be able to spend about $450 of the $500 he/she has deposited. On the other hand if the individualís credit score was just a bit low the lender may allow $750 to be spent on that deposit. Each case is different and each lender has a different set of restrictions on secured credit cards.
Improving Credit Score With Secured Credit Cards
When a consumer continuously pays his/her credit card payments in a timely manner and shows responsible spending habits, there is a good possibility the secured credit card company will increase the limit over a period of time. In addition, credit card companies report to the three major credit reporting agencies. This means that timely payments will reflect on a personís overall credit report. In many cases a secured Mastercard or a secured Visa can become unsecured credit cards after a certain period of time has passed, provided all payments have been made on time and there have been no issues. This is one of the many methods people use in an effort to increase their credit rating. The best way to use a secured credit card is to use it regularly and make payments every month. Typically, there will be a minimum payment required and making a payment which is slightly higher than that will help increase a personís credit score.
Compare Credit Cards
Not all secured credit cards are the same and they can come with very different interest rates and fees attached to them. The best thing for a person who is looking for an unsecured credit card to do is to research each one thoroughly. There are also some credit cards that will require a high insurance payment to be made on top of interest and normal fees. This can cause a person to incur more debt, thereby worsening an already bad financial situation. For this reason, choosing the best prepaid card is essential. There are offers being advertised all the time for secured credit cards from the various credit card companies. This is mainly because there is a lot of money to be made on pre paid and secured credit cards as the interest rates are higher. In addition, credit card companies incur very little risk by giving out these cards because there is little to no chance they will be left holding the bag should someone not pay their credit card bill.
The best way to search for a secured credit card is to go online and do a search. Most credit card companies offer simple applications that can be filled out online and usually approval is instant.