Are you finding it difficult to qualify for a traditional credit card? Are you interested in learning more about a secured credit card? Do you have reason to believe that this could improve your financial situation?
In many ways, a secured credit card is exactly the same as a traditional credit card. However, there is one major difference: with a secured credit card, you are required to make a deposit in order to receive an approval.
The deposit is collateral for any purchase you make. So, if you default in the future, the card issuer has the legal right to keep your deposit. This should be reason enough to stay current with payments.
Despite the need for a deposit, there are many benefits of using a secured credit card. These include but are not limited to the following:
1. Approval is Almost Guaranteed
While there is no way of knowing what will happen until you apply, since you’re making a deposit as collateral you don’t typically have to worry about a denial.
2. It Can Boost Your Credit Score
When applying for a secured credit card, make sure the issuer reports all activity to the three major credit bureaus.
As long as you do what you’re supposed to, as opposed to defaulting, the use of a secured credit card will help boost your credit score.
Over time, you’ll find yourself in position to apply for and receive a traditional credit card.
3. You Can Earn Interest
This isn’t something that comes into play with a traditional credit card, however, it can work in your favor if you opt for a secured offer.
Depending on the card and issuer, you may be able to earn interest on your deposit. It won’t result in a lot of money, but the more you deposit and the longer you keep your credit card the more you’ll earn.
What Now?
Now that you understand the benefits of a secured credit card, you can decide if this is right for you. If you like everything you’re reading, it’s time to take a few key steps:
- Make a list of three to five secured credit cards that interest you
- Compare the pros and cons of each offer
- Focus on details such as the minimum and maximum deposit amount, interest rate, and online account access
From here, there’s only one thing left to do: complete an application and see what happens.
Once you have your secured credit card in hand, you can then use it to improve your credit score (and possibly earn a few dollars in interest).
Final Thoughts
Most people would rather carry a traditional credit card, but this may not be possible right now.
If you have bad credit or no credit, a secured credit card may be just what you need.
Do you have any experience using a secured credit card? Did it provide the benefits you were hoping for? Share your thoughts on this financial tool in the comment section below.
