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Understanding secured credit cards

6 Great Things About Secured Credit Cards

by / 0 Comments / Apr 03, 2015

There are so many benefits to secured credit cards that it’s a wonder more people don’t know about or have them. Need convincing? Here are six great reasons to become a fan if you have trouble finding credit card offers for bad credit unsecured:

Forced savings

Everyone knows that having at least some cash tucked away that you can’t access easily is smart. It’s just not always easy to do. A secured card often requires deposits of a couple of hundred dollars on up to thousands. Since you can’t get at the money unless you close the account, those funds are protected against temptation. You may be able to open a card with less, but by depositing more you get a larger credit limit and more savings!

(Relatively) easy acceptance standards

Though to qualify for secured credit cards you do need to have an income that can support the credit line, your credit rating needn’t be stellar. Because the money acts as a guarantee, the issuer loosens their qualification requirements to include those with bad or thin credit files.

Credit building or rebuilding

The moment you get the secured credit card and start to use it the activity for that account shows up on your consumer credit reports (presuming they report, so check first). The account is factored into your credit scores, and since recent data on reports matter more than that which is old, you can change your past with fresh, perfect payments.

Forge a relationship with a good lender

If you get the secured credit card from a major credit issuer, you will begin to form a positive association with them. Treat this account well and you may be able to obtain a low rate mortgage, vehicle, personal, and business loans with them later.

Secured Credit Cards provide Independence.

One of the ways to get your foot in the charging door is to ask someone with good credit to cosign for you, or for you to jump on their existing account as an authorized user. That can be a fine arrangement, but its far better to stand on your own two financial feet. A secured credit card in just your name allows you to be the sole owner of the account. Autonomy is a beautiful thing.

Conversion to unsecured cards

After you prove your credit prowess with the secured credit card, the issuer may allow you to convert it to one that’s unsecured. For example, the Citi Secured MasterCard advertises that after 18 months of responsible use, you’ll be eligible for a trade up to an unsecured credit card and you’ll get your deposit back.

Clearly you’re not out of luck if you don’t already have fantastic credit. Money, as they say, talks.

About the Author

Erica Sandberg is a renowned personal finance editor, advice columnist, and reporter. She hosts her own video program, Making it with Erica, and is a frequent guest on national news shows, from Fox to CNN. Her book, Expecting Money: The Essential Financial Plan for New and Growing Families was the first to address the specific financial needs of new parents. Erica is the spokesperson for some of the finest businesses and products in the U.S., including Western Union, the Better Business Bureau, Bank of America, CVS Pharmacy, Michael Minna Restaurant Group, Bounty paper towels, Chase Card Services, and Assurant Solutions. Prior to her her current journalism career Erica was affiliated with Consumer Credit Counseling Service of San Francisco for ten years.

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