Secured Credit Card Applications
Banks That Offer Secured Credit Cards
Secured Credit Cards 101
Almost everyone knows that having a good credit score makes a lot of things considerably easier; conversely, having a low credit score (known as having “bad credit”), makes things not only more complicated, but also a lot more expensive. With good credit, large purchases that require financing are a lot easier to make, for example getting a mortgage to buy a house or a auto loan to buy a car. The only catch is that having good credit is not easy, and according to a lot of people, keeping a good credit score is even harder. Getting your credit score back up after you’ve made a few mistakes can prove to be quite hard because you’ll find yourself in a catch-22. You need credit to rebuild your credit, but no one will give you credit because you have bad credit.
One of the best solutions is to get a secured credit card. The fact is that a low credit score causes banks to consider you to be a high risk, so they will be very reluctant to extend you any form of credit. With a secured credit card, you can get past that hurdle: when opening a secured credit card amount, you’re required to come up with a deposit, which you sign off to the credit card issuer, allowing them to hold it as collateral against the amount that they will give you as a limit on your secured credit card. In simple terms, you allow the credit card company to use your deposit to recover their money if you fail to pay what you owe on the credit card.
How high will your limit be on your secured credit card? That’s all going to depend on the financial institution. If they run your credit, it will depend on their internal policy, as well as how bad your credit is. In some cases, you may get a limit that’s the same as the deposit you’ve come up with, meaning that you get a $500 limit for depositing $500 as collateral. Other financial institutions will give you a limit that’s less than the amount you’ve deposited, to account for various fees and finance charges that you would undoubtedly be charged if you failed to pay the card. They want to leave enough “space” to be able to recover that as well. This is because they will only use that deposit when the account is closed completely. Meanwhile, if you’re late on a payment, you’ll be charged late fees and interest, and there’s the possibility that by the time they close the account, your total debt may be higher than the collateral.
Secured Credit Cards To Help Repair Your Credit
This is one of the top strategies used by many people because it allows to lay a foundation to show newly-acquired good money management skills. In case you’re looking for a secured credit card because you realize they’re an excellent way to repair your credit, then you need to keep a few things in mind. First off, just getting one of these cards is not going to instantly raise your credit scores, unless you know how to use it so you can get the most out of it.
When you get your secured credit card, make sure that you use it. Although getting the card will raise your overall credit limit (which helps, all other things being equal), your credit report lists your accounts’ last active date. If you never use the card, there will be no activity to show and the score increase from getting the card will not be as high as it could be.
As for how much to charge on the card, it’s generally recommended that you don’t go over half of your credit limit. It’s widely believed that charging your card past that threshold causes your score to drop. So some people suggest that you don’t go over 30% of your limit, just to be on the safe side. Of course, if you have the means to pay if off each month, then you don’t even have to worry about this.
Finally, saying that you should not accumulate late payments on this card is pretty much a no-brainer. Late payments will quickly cancel out any positives you’ve managed to accumulate from getting the card. Late, in this case, means 30 days or more. Below that, you will be charged a late fee, but most likely that will not be reported. You can avoid late fees altogether by automating the payments to the credit card company.
Secured Credit Card Application Tips
Filling out a secured credit card application is not something you should do without taking the time to really compare offers and weigh the different options that will present themselves to you. There are countless companies offering this type of credit card, and you want to make sure that the one you sign for is the one that best meets your needs and budget. Follow the below tips to get the most of the offers you’ll come across.
Know how big you want your deposit to be. It’s a requirement that you make a deposit to get a secured credit card. This money should not sit there idle; it should be placed in an interest-bearing account. If, for whatever reason, you stop paying the credit card company, they’re legally able to use that money to pay for what you owe them. How large your deposit is may impact how much you’re charged for transactions and interest.
Pick your lender. You want to make sure that the bank that is issuing the credit card is a legitimate one, that’s in good financial shape. This is very important, as nobody wants to fall victim to fraud. Just as important is your history with that particular company. If they’ve financed your car and have had to have it repossessed, then it’s a good bet that they won’t want to work with you in the future.
Be accurate. Don’t try and play with any numbers they as from you. You won’t get much from that anyway, since this is secured credit. Also keep in mind that inaccuracies will lengthen the approval process, so that’s not a good thing for you.
Take a good look at the fees. Find out what the APR (Annual Percentage Rate) is, as well as all the other fees that are applicable. the APR is the rate of interest you will be charged on purchases and cash advances for your account. It’s crucial that you find out whether the APR you have been quoted upon approval is permanent, or whether it’s an introductory rate that will go up after a certain time.
Apply online. Applying for a secured credit card online will give you the quickest response time.