There are many types of credit cards are available in the finance market, such as Low-Interest Credit card, Rewards Credit card, Balance Transfer credit card, and Secured Credit card. Today, in this article, we are going to explore how does a Secured Credit card work, and we’ll also mention their advantages and disadvantages.
So, if you are looking for about such topic on the internet, then you are at the right place. Here, below we have covered all the required information about the secured Credit Card so that you can easily get an idea about to What is a Secured Credit card and how does it work. So let’s get started.
What is Secured Credit Card?
In a simple way, the Secured Credit cards can use be used to improve the credit score of the borrower. If you want to apply for a credit card with having a bad credit score, then the Secured Credit cards can be the best option that you go with.
There are many ways that you can use to improve your credit score but the “Secured Credit Cards” are the best way that you can use to improve your credit score instantly without having the bad experience.
Because the application method of secured credit card is similar to other credit card applications process so that you don’t need to do the extra process to get Secured Credit Card. But unlike the other credit and debit cards, You will need to deposit a fixed amount into your account, after your credit card application get approbation by the bank or credit card issuer.
With a secured credit card, the borrower can easily be able to improve their credit history, and if you are new to credit card market, and want to build you credit score much better than before, then the Secured Credit card is the best option to you.
For Example, if you have an applied for a Secured Credit card, and you make a deposit of $250 into your account, then, you will only have a credit limit of $250. That means that you will get a credit limit on your Secured Credit Card equal to your deposit.
In another way, we can also say that you are borrowing your own money from credit card issuer or bank, In order to improve your credit score or rebuild your credit.
There are many questions comes to our mind while applying for the secured Credit card. These includes:
How much money should you need to deposit?
In the Secured Credit Card, most of Credit Card issuers and banks allow the minimum deposit of $300 or $500, so that the desired person can easily be able to apply for a Secured Credit Card. So, if you have deposited an amount $300 into your account while applying for a Secured Credit card, then you will be able to get the limit equal to your deposit amount. Or some bank and Credit card issuers may also offer extra limit of some percentage of your total limit.
So, it depends on your credit history and your past credit. But, as we have mentioned the above, to get secured credit card only you need to make a deposit of a minimum amount, which is $300 and $500. And after you complete all the formalities for getting a new Secured Credit Card, then the bank or credit card issuer can issue your credit card.
Do all banks offer Secured Credit Cards?
Of course not. But on the online, you will find plenty of credit card issuers’ company, and they all are allowing the people to apply for their credit card with minimum documentation. And, be aware of them, because they can charge you more when compared to other banks and lenders.
So, make sure that you are applying for a credit card in the authorized companies and government regulated banks. On the internet, you will find plenty of tools that enables you to check the best that which bank or company are allowing to apply for a secured credit card.
Additionally, some banks, and credit card issuers are only offering their secured credit card to the people who are new to credit card and are applying for the credit card.
Will my deposit earn interest?
As we have also mentioned above that, you will get a limit equals to the deposited amount that you have deposited while applying for a credit card. So there is no chance to earn interest on your deposited amount.
But some of banks and lenders also offer the rewards on your spendings, so if you are looking for the best Secured Credit Card that also offers rewards points while spending money on the credit card, then you should need to find on the internet, and I’m damn sure, that you will easily be found your ideal Secured Credit Card with the minimum deposit required.
What types of charges will there be?
There are many charges that you will need to pay when go for applying for a new Credit card, and will stay for till your account be closed. So, make sure that wherever you are applying for a new credit card where you don’t have to pay anything except the application fee. But some of banks and lenders can do charge an annual fee for your Secured Credit Card.
How does a Secured Credit Card work?
As we have mentioned above that Secured Credit Cards are the similar to other credit cards, but in the secured credit card, you will get the limit equals to the deposited money that you have deposited to your account while applying for a credit card. And the user can also use the secured credit card to make payments on local stores.
Most of the people are also using the Secured Credit card to build or rebuild your Credit. It also can be used to improve your credit history. So, if you are new to credit card market, and want to build your credit score more strong, then the Secured Credit Cards are the best that you can choose.
There are many good things about the Secured Credit Card, and here, we have mentioned about the few best advantages of Secured Credit card, so that you can get an idea about how Secured Credit Cards are good. So let’s get started.
- Unlike the other traditional credit card application, you can easily be able to apply for a Secured Credit Cards, and here, you don’t have to submit your any Credit Score to get approved from banks and Credit Card issuers.
- By using the Secured Credit cards, you can easily be able to build and rebuild your credit without having any risk. As you know that your spendings and other payment that you make by using the Credit card, they will all include in your credit report. And by paying an on-time payment and managing your account balance will help you to rebuild your credit history.
- You can also earn few reward points on your spending with the Secured Credit Card. As we have mentioned the above that some the banks and Credit Card Issuers are also offering a reward point to their customers when they make payment on shopping, movies, gas station, etc.
- Like the advantages of a Secured Credit card, here we have also mentioned about the few drawbacks and disadvantages, So let’s have a look at these:
- Unlike the Traditional Credit card, you will need to pay a security amount deposit, which is fixed by banks and credit card issuers. With the Secured Credit Cards, you may need to pay an application fee to the credit card issuers.
- The biggest drawbacks of Secured Credit Cards are that you may have to pay a higher interest rate on your spendings. So, make sure that you are paying your full payment each month. Because, if you are not paying in full each month, you can be charged more interest rate on your spending by some credit card issuers. So to avoid high-interest rate, make sure that you are paying your full payment each month.
The Finale thoughts
In terms of other credit cards, the Secured credit card is easy to understand and also helps you to improve your bad credit. So, if you are looking for the best credit card that can also help you to improve your credit score, then be applying for a Secured Credit card is the best way that you can rebuild your bad credit history.
We hope that you will like this guide on how does a Secured Credit card works, and if you want to give any suggestions on his guide, then you can also tell your thoughts in the comment section below.