Secured Credit Card Ratings And Tips

Credit cards provide both convenience and security, and allow consumers to finance large purchases, such as vacation. Credit cards are also used as a security deposit in many situations, such as renting a car, or booking a hotel room. Yet, for those with a poor credit rating, getting a traditional credit card can prove very difficult, if not impossible. Secured credit cards offer an opportunity for consumers with limited or poor credit to obtain a card.

HOW A SECURED CREDIT CARD WORKS

A secured credit card is just what it sounds like; it is a secured by money that is deposited in a separate account. The consumer is not using his or her deposit money, rather the bank holds it in an account, in case of default. Although each type of secure card works a little differently,  the process goes something like this:

1. The consumer fills out an application, providing basic personal information.
2. The consumer deposits the specified amount of money into the bank. In many cases, the amount of credit extended will equal the amount of the deposit; sometimes, it will be more.
3. The consumer receives the card, which can be used after activation.

If the account holder should default, the card issuer would use the money from the account to pay off the balance. Card issuers report payments to the major credit bureaus, so that as long as the consumer pays his balance as agreed, it will improve his or her credit rating.
HOW TO CHOOSE THE RIGHT CARD

It pays to do your homework before choosing a card. Every issuer is a little different, and you want to be sure that you pick the one that best fits your preferences and needs. There are many websites that offer secured credit card ratings and information. You’ll want to keep the following questions in mind when you are comparing different card offers.

* What is the deposit amount that is required to open an account?
* What is the APR (annual percentage rate) for both purchases and cash advances?
* Is there a grace period for purchases, during which you do not have to pay interest?
* Is there an annual or monthly maintenance fee?
* Will the card issuer report your payments to the three major credit bureaus?
* Does the card offer any additional benefits, such as consumer warranties or fraud protection?

A secured card offers a great opportunity for individuals who want to improve or establish  credit. Good credit is necessary in today’s society, and not just for obtaining a line of credit, or buying a house. In recent years it has become increasingly common for companies to check applicant’s credit histories and consider their creditworthiness as one of the factors in hiring. Property management companies also use review credit history for applicants.

Everyone makes mistakes, and many people have bad credit as a result of factors beyond their control. While it does take some time to rebuild a good credit rating, it is worth the effort. Secured credit cards provide a great way to re-establish credit.