Credit cards can be said to be one’s induction into adulthood. It takes a sense of responsibility to be able to properly manage one. As an adult, being responsible for one is essential in building a good credit score.
It also serves as a testament to how well you manage your finances. It says that while regularly using your card, you still make all your payments on time as well as using a portion of your credit limit.
Like any other venture involving money, trust and security is of utmost importance. This also applies to credit cards. Using the best secured credit cards is essential to your financial security especially for people trying to rebuild their credit score and the company issuing the card. Keep reading to learn more.
What Are Secured Credit Cards
Secured cards are a variation of credit cards supported by cash deposit from a shareholder. The deposit serves as collateral on the account. It provides the card issuer a level of security in a situation where the cardholder can’t make his or her payments.
When using this kind of card, an individual is limited to only the amount put down as the deposit. This means that the limit is determined by the amount deposited in the individuals account.
This method is really beneficial when an individual is looking to improve his or her credit score. This is especially applicable to subprime borrowers or individuals with bad history. Card issuers make reports on the cards to credit reporting agencies which can help boost an individual’s score.
Major Benefit of a Secured Card
This method of accessing credit is quite expensive, but a great choice for one trying to build a good score. There are various costs adding up to make this an expensive option. Their annual percentage rates are definitely on the high side but compared to other methods available to an individual with weak score it is quite manageable.
They are created mainly for people with low credit score problems as well as poor or little history. It can also be of help to those experiencing trouble qualifying for the regular cards.
This is because, unlike regular ones, secured ones require a cash deposit to be used to reduce the risks and compensate card issuers in case the cardholder is not able to make payments. You can check here https://www.nerdwallet.com/ to learn more about them.
This method can help build an individual’s score when reliable and regular payments are being made. It also gives the cardholder a chance to not only build their credit but also access those that are less expensive.
What to Consider When Choosing a Card Company for a Secured Card
Here are some factors to consider when choosing a card company.
Low fees and interest rate:
Generally, compared to unsecured ones, secured credit cards come with higher interests and fees. But different companies have different rates therefore, it is important to do your research into companies with relatively lower interest and fees.
Flexibility to change payment due date
Naturally we can’t predict some situations. Events happen that can hinder an individual from being able to make his or her payment on time. Therefore, it is important to use the companies that can give you flexibility to change your payment date.
Opportunity for an upgrade
As a cardholder, once you have achieved the goal of raising your scores, you can start looking into regular cards. Thus, if you plan to upgrade, you can start by looking into companies that offer an option to that when your score has been raised. You can also click here to learn about how to build a secured credit card.
Owning a secured card is very essential especially for individuals having problems with their credit scores. Building a good score from the bottom can be especially intimidating. It is a big responsibility yes, but very possible.
All it takes to achieve this is time and good money management skill. If you have made certain mistakes leading to a low score, you should know that it can be fixed. Using this card variation can almost guarantee that you can successfully solve your problem without debt.