What Can A Secure Credit Card Do For You?

November 10, 2011
By GuestPoster
>Much like bank loans, credit cards can now be obtained in two types: secured and unsecured. Secured means that you are required to put some form of asset down to determine your loan amount and be used to make the lending party trust you to repay. If you miss your payments, they can then take your property as a form of full payment. With secured credit cards this is very similar, but instead of the asset being something as big as a house or car it can simply be a cash payment or something like gold or diamond jewelery.

Secured credit cards and bad credit

For anyone struggling with bad credit, finding a financial aid can be very stressful and a long and complicated process. There are now many options available to these people and one of these is a secured credit card. Because you put an asset or cash on the line to secure the deal, a secured card is available to literally anyone. The vendor doesn’t see the need to investigate your credit history, as in theory you have already paid them for the balance on the card, so they are not losing anything. This is a great solution as it doesn’t require big or long payments like a loan for people with bad credit, or draw the amazingly high interest of pay day loans.

Advantages of secured credit cards

Credit cards bring some amazing benefits to all of us, the primary one is said to be the fact that “in theory” you never really owe any money to anyone. When you make your initial deposit on the card your card balance is determined by this amount (it may be lower) but because of this if you’re ever struggling to repay, it may not seem as bad. If you are really in a mess you can simply end the deal and the card vendor can take the asset you first gave them and take it as their own property, leaving you debt free.

As mentioned above briefly, another great thing about secured credit cards is that you can literally determine what your balance will be. Some card companies will have a maximum and minimum deposit amount and some will also either give you the amount you deposit directly or give you a lower amount. It is recommended you ask about this before taking out the card. Either way you can find out how much you must deposit to give you the exact balance you wish to hold.

The disadvantage to a secured card, much like the standard credit cards, are the extra charges that may apply (these may vary depending on the supplier of the card). Typically charges you will occur include:

  • Application Fees – This is a general fee when you first get hold of the card; it is usually a small fee and shouldn’t be too much hassle
  • Annual Fee – This is the annual charge the vendor charges you for having a card of this type; this is usually a set rate
  • Interest – This will be a set percentage of the balance you owe on the card
  • Over the limit/ Late charge – These are applied if your payment is late or you go over the limit

As you can see, secured credit cards offer many benefits compared to a standard unsecured card and they are both almost equal in terms of disadvantages. However, it is still recommended to check out all options before jumping to a financial solution.

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