Do you have bad credit or no credit? Are you finding it difficult to obtain a credit card? Are you almost ready to give up? Perhaps it’s time to consider a secured credit card.
Fortunately, there’s a financial tool that’s perfect for you (and millions of others in the same situation): a secured credit card.
A secured credit card is designed for consumers with bad credit, no credit, or a short credit history. It requires a cash deposit upon opening an account, which then acts as your credit limit. So, if you make a deposit of $500, you then have a limit of $500.
Thanks to the deposit, the credit card issuer doesn’t take on much risk. Here’s why: they have the right to take money from your deposit should you neglect to pay your bill.
It may not be exactly what you want, but there are multiple benefits associated with a secured credit card:
1. You Don’t Need Good or Excellent Credit
Many consumers find it impossible to obtain an unsecured credit card because they have poor credit. Simply put, credit card issuers don’t want to do business with them.
With a secured credit card, you don’t have to worry about this. Even if you have an extremely low credit score, the fact that you’re making a cash deposit allows you to obtain a card.
2. It Helps You Build Your Credit and Increase Your Score
When you have no credit and/or a low score, you may struggle with devising a strategy for making progress. A secured credit card may be just what you need to take a step in the right direction.
As long as you use your card responsibly, which means making on-time payments, you’ll find yourself establishing a solid history while also boosting your score.
Tip: before applying for a secured credit card, make sure the issuer will report all activity to the three major credit bureaus. Without this, you won’t be able to take advantage of this benefit.
3. It Keeps Your Spending In Check
Let’s face it: one of the primary concerns of any credit card holder is overspending. When you have access to money, you’re more likely to spend.
With a secured credit card, this is less of a concern since your limit won’t be high enough for you to take on an extreme amount of debt.
Some people need help keeping their spending in check, and that’s exactly what a secured credit card will do.
Along with the above, there’s one final benefit of a secured credit card: the opportunity to eventually graduate to an unsecured credit card.
If you prove that you can use a secured credit card in a responsible manner, you put yourself on the path to graduating to an unsecured card.
Final Thoughts on Secured Credit Cards
Some people never have to use a secured credit card, but others rely on them for one reason or another.
If you think a secured credit card could bring some good to your financial life, compare offers and make a choice based on your financial circumstances and goals.