In today's society, having a credit card isn't just a luxury, it's a necessity! Not only do credit cards allow consumers to finance large purchases over time, they provide security during an emergency and they are often used as security deposits when booking a hotel reservation, or renting a car. Yet, for individuals who have a poor credit score, it can be extremely difficult to get a card; and, without a card, it is nearly impossible to begin to rebuild good credit. It can become a very frustrating Catch-22 ..
One answer to this dilemma is a to apply for secured card. Secured credit cards are offered by many banks, and are basically a line of personal credit that is guaranteed by your minimum savings deposit with the issuer's bank. For example, the card issuer might require you to deposit $ 300, then give you access to a $ 300 (or, in some cases, more) line of credit. To many consumers, this is a more attractive option than choosing the other types of cards that are designed for people with fair to bad credit; They often charge exorbitant interest and fees.
Of course, to get a secured credit card, you must have on hand, or save up the amount of money that the card issuer requires for the deposit. You will not lose this money, unless you default on your card payments, in which case the issuing bank will use your bank deposit to pay off your outstanding debt with them. However, you will not be able to access your deposit without closing out the account. Even then, the issuer will typically take the remaining amount of money owed on the card out of your account, and refund you the rest.
That said, secured credit cards can be a great way to start rebuilding, or establishing, a great credit record. The issuing bank will report your payments to the three credit bureaus, and on-time payments will quickly raise your credit score!
Finding the best secured credit card to rebuild credit, while providing all the features that you are looking for, can be a difficult task. It's a good idea to shop around for the best deal, as the conditions of cards can very greatly. You can also inquire as to whether it will be possible to switch your account over from a secured card to a traditional account, after an agreed-upon number of on-time payments. There are numerous websites that compare the features of cards issued by different banks, and this is a good place to begin your research. When you are looking for a new card, it's important to consider the following points:
* What is the APR (annual percentage rate) for the card?
* Are there any annual or monthly fees, and if so how much?
* Does the card have the features that I am looking for?
* Is it possible to change my payment date if needed?
* Does the issuing bank offer a chance to switch your account over to a traditional (non-secured) account later?
Although it can be difficult to repair injured credit, it is not impossible, and secured cards are on tool that can help you work towards your financial goals.