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Secured Credit Cards for Credit Repair and Credit Establishment

What Is a Secured Credit Card?

A secured credit card is a special type of credit account issued by many banks. After approval, a person must set aside a certain amount, usually ranging from $300 to $500, and send that money to the bank as collateral for the credit card. The deposit accrues minimal interest in a savings account. Most banks withdraw from the deposit account only if the credit card bills are nearing the collections stage, but a few lenders do tap into the deposit if even a single payment is late. The collateral account is never used to pay monthly bills; it is intended to compensate the lender in case the cardholder defaults on the account.

The cardholder can then use the secured credit card like any other card, charging up to the credit limit and paying at least the minimum amount due. The credit limit is typically set at the full or partial amount of the deposit. Some banks may reward good payment behavior by increasing the credit line without asking for a larger deposit.

Who Uses Secured Credit Cards?

Almost everyone can apply for secured credit cards, but they are most attractive to two groups of people. These applicants include individuals who want to revive their financial situations after having bad credit and people who have never had credit cards and want to open their first accounts. Because a credit score affects everything from renting a house to leasing a car or getting insurance, building a substantial credit profile is a modern necessity. Most secured credit borrowers are able to qualify for a traditional, unsecured card after about a year.

Secured Credit cards can help build or rebuild credit because the bank reports activity to the three major credit bureaus just like they do for unsecured cards. Building a up a strong payment history is the best way to improve your credit score.

Choosing the Best Secured Credit Card

Most banks and credit unions offer secured credit cards. These cards do typically have higher interest rates and more restrictive account terms than unsecured cards, so shopping around for the best deal is still necessary. Consumers should pay attention to the annual fees, application fees, APRs, deposit requirements, and conditions for charging on the card and paying it off.

Individuals who can qualify for an unsecured credit card are frequently better off doing so. For everyone else, the fastest way to demonstrate financial responsibility while enjoying the flexibility of a revolving credit line is to open a secured credit card account.

If You Need Credit or Debt Management Help

If you need help managing your debt or dealing with credit problems, contact Advantage CCS today. Our credit counselors are available to help you get your debt under control and help you get back on track today.