Can Secured Credit Card Offers Really Help Fix My Bad Credit?

As news about the global economy continues to deliver discouraging news, many people are looking for alternative ways to shore up and repair shaky credit ratings. As a result, the financial market has been absolutely deluged with a plethora of secured credit card offers that seemingly end up in mailboxes every day. Many banks have tightened up their credit requirements for loans and unsecured credit cards because of the current financial crisis, and as a result, many consumers now have no choice but to consider applying for secured credit cards. And many banks are looking at secured credit cards as a new avenue of revenue for their bottom lines. However, as more and more banks get into the unsecured credit card business, it becomes of vital importance for a consumer to do their homework and research every single offer. The startup costs and various fees associated with the cards differ widely with each offer, so it becomes a matter of buyer beware. 

Essentially, a secured credit card offers a consumer a chance to enter the credit card market by allowing the consumer to make a minimum security deposit in order to open their account. Typically, most banks start with a minimum deposit of $200. Depending on the opening credit limit, the consumer can deposit money into the card right up to the limit, and then as the consumer pays minimum monthly payments on time, the credit card’s limit is gradually increased. Since the secured credit cards are backed by the customer’s deposits, generally the cards offer a lower interest than a normal unsecured card. Unsecured cards can carry interest rates up to 30 percent, and this is due to the bank taking a risk in offering unsecured cards to customers with poor credit histories. Since secured cards are backed up by matching deposits, the risks for the bank on a secured credit card is dramatically lower.  Since the banks are charging lower interest rates on secured credit card offers, they attach several different fees to the card in order to make up the difference in interest rates between secured and unsecured cards. This is where the decision making process becomes of vital importance to the consumer. Banks offer widely different fee rates, from its startup costs down to late payment fees. Making a late payment on a secured credit card can be especially costly, as many banks charge a 30 percent interest rate on any payments made after the due date. Other fees are charged for credit card balance transfers and ATM transactions. 

Today, a trip to your mailbox can sometimes yield four or five different secured credit card offers in one day. If rebuilding your credit is a priority, a secured credit card is a good way to start, however it’s important to do as much research as possible before making a decision on any credit card. Is the bank reputable and well known? Have there been numerous complaints listed against them with the FTC or Better Business Bureau? What do their customer reviews look like? These are all major factors to be considered before making the final decision to apply for a secured card.