How Secured Credit Cards To Rebuild Credit Actually Help

Many consumers in recent years have seen their life savings dwindle significantly because of the struggling global economy, and many of those same consumers have seen their credit histories and credit ratings take a significant blow as well. In the past couple of years especially, many consumers have resorted to secured credit cards to rebuild credit ratings, and more and more banks have introduced new secured credit card options for their customers. While there are a number of benefits that can be achieved through applying for secured credit cards, there are some pitfalls that also must be addressed when considering the option. While banks have stepped up their marketing efforts in order to promote the use of their new secured credit card options, many consumers are failing to see the picture and reading the fine print, the practice by which the banks use to describe their terms and conditions. While the credit cards offers look attractive on their face, research needs to be conducted in order to determine if secured credit cards are indeed the best option. 

The practice of using secured credit cards to rebuild credit makes sense on several fronts. First, and most importantly, secured credit cards offer much lower APRs in comparison with unsecured cards. Many banks offer a cash APR as low as 7 percent, while APRs for unsecured credit cards can range upwards of 30 percent. This is primarily because the consumer is using his own money to actually secure the credit card by making an initial deposit of at least $200 to start the account, and then making additional deposits depending on the credit limit of the secured credit card. Therefore, the bank’s overall risk is much lower, considering the fact that consumers are backing the credit cards with their own money. The pitfalls, as mentioned above, are that many banks will attach various fees to their unsecured credit cards. They do this because they are making limited money on the lower APRs attached to unsecured credit cards, and the fees help to make up the difference in profits for the banks.

 Just about every secured credit card has a startup fee and an annual usage fee. The secured credit cards also have fees for ATM transactions, transfers of balances from other credit cards, and some banks will also charge for simple inquiries as well. While secured credit cards to rebuild credit is a great idea on its face, consumers need to research the fine print of every single credit card offer they receive, in order to divulge all of the fees associated with the card, and to see if the card makes sense for their individual credit needs.