In today’s world of convenient financing, a good credit score is must as it can affect everything from renting a home to placing a deposit on a vehicle for leasing. However, there are some people that have not established credit or have misused their credit in the past – resulting in a low score. For these people, the option is now available to pay a deposit in return for the privilege of using a credit card in the process of rebuilding the credit rating.
Secured credit cards are those that require some sort of collateral to be placed on the account to secure the line of credit that has been offered to the consumer. Most often, this source of collateral is a cash deposit that is given to the credit card company upon the opening of the account which will be held until the account has been established, or until a new credit card account can be opened when the applicant is approved for a traditional non-secured credit card.
At the end of this term when the card holder decides to close the account or the account has been approved to a non-secured status, the deposit is returned to the card holder. This money is returned in the form of a check or can be applied to the balance of the card – as long as the account and the credit card is in good standing.
Who uses secured credit cards? Secured credit cards are beneficial for those with little, no or less than favorable credit, trying to pump up their credit score. The activity that is on the credit card is reported to the three major reporting agencies on a monthly basis and therefore can affect the credit rating positively when the card is used wisely – in as little as six months. Secured credit cards are available for those who are new to the country and require the use of a credit card to rent a vehicle, a hotel and even place a deposit or shop on the internet.
Of course, this secured credit card often comes with a price. The higher interest rating is often applied to secured credit card – as the card holder is deemed riskier than consumers that are approved for non-secured credit cards. As we have learned, the higher risk a consumer for a credit card company, the higher the credit rating that the consumer is going to be subject to.
Secured credit cards often come with an annual fee for the cost of convenience, especially if the credit card company is offering a lower interest rating. This annual fee may be worthwhile, especially if the consumer is going to carry a balance on the credit card. Therefore, the interest that would be paid through the term of the card is often higher than the annual fee that would be associated with the credit card.
Secured credit cards are an important tool in building the credit rating and can be obtained from a variety of companies. Simply contact the company or visit the website to determine which secured credit cards are available and the terms that are associated with each.