Secured Credit Card

A secured credit card uses a savings account as collateral for the purchases made through the card. These cards are offered by many banks and finance companies. The credit limit equals the deposited amount in a secured or savings account. In case of regular non-payment of the outstanding amount, the secure credit card issuer is allowed to charge the outstanding amount to the savings account.

A secured credit card uses a savings account as collateral for the purchases made through the card. These cards are offered by many banks and finance companies. The credit limit equals the deposited amount in a secured or savings account. In case of regular non-payment of the outstanding amount, the secure credit card issuer is allowed to charge the outstanding amount to the savings account.

Secured Credit Card: Features & Benefits

A secured credit card helps people, who have no credit history or a poor credit history, build or rebuild a good credit history. Other features and benefits of such cards include:

• Purchases can be made up to the secured or deposited amount.

• A cardholder can pay off outstanding bills within the grace period or forward the balance to the next month.

• It is much easier to get approval for a secured credit card than the conventional credit card.

• A cardholder’s security deposit is not used to settle the default payment unless there are five-to-six regular non-payments.
• A cardholder can also earn interest on the deposit if the credit card issuer puts the deposit in an interest-yielding account.
• A secured credit card can help get you an unsecured credit card or credit since your payment records are sent to the credit bureaus by the credit card issuer.

Secured Credit Card: Drawbacks

While a secure credit card has many benefits, there are a few drawbacks as well, such as:

• The amount that needs to be deposited as collateral varies between companies. Many banks or financial institutions demand a deposit larger than the offered credit limit.
• Many banks offer less credit limits, which might not be as convenient as one might have imagined.
• Secured credit cards usually have higher interest rates, since the company considers these cards unsafe or risky.
• The forwarded balance is subject to an Annual Percentage Rate (APR).
• A secured credit cardholder pays several fees, such as the application fee, annual fee for having a secured credit card and the processing fee.

Secured Credit Card: How to Apply

All banks and financial companies do not offer these cards. So, it becomes very essential to look for secured credit card (SCC) issuers who are legitimate and recognized. Before applying for a secured credit card undertake thorough research online for recognized companies and keep the following things in mind:

• The cost of having the secured credit card
• The amount of deposit required
• The offered credit limit
• The Annual Percentage Rate (APR)
• Are payment records reported to credit bureaus?
• Is it possible to convert to an unsecured credit card?

Some Issuers of the Secured Credit Card

• GTE Federal Credit Union
• Digital Federal Credit Union
• Orchard Bank
• Applied Bank
• New Millennium Bank
• Public Savings Bank