Sadly, Visa is now accepted in more places than cash. Millions of credit cards are being used daily for purchases. Visa, MasterCard, & AMEX, are in just about every household worldwide and the trend is not going to die anytime soon.
There are people though who do not have the means to obtain a regular credit card, be it a lack of credit in general or too much bad credit combating the application process. Here, a secured credit card can come into play as an asset to building your credit rating and history.
A secured card works just like a regular credit card with the exception of having to deposit your own funds initially to open the account and utilize as available credit. Some banks require a minimum amount be deposited to obtain a secured credit card while other banks simply do not offer the option. The average deposit requirement ranges between $200 – $500. Whatever amount you decide to deposit will be the available spending amount for the secured credit card.
Just like a regular credit card, a payment is due each billing cycle and interest fees are applied to purchases and cash advances as applicable. Yes, this means you will be paying interest to spend your own money. While this may seem asinine, for some consumers it is the best way to build a good credit score or help combat a bad credit rating.
It is a good idea to know who you are getting into bed with before making any commitment. You could say the same about establishing credit with big banks. There are some things you want to consider when shopping banks for a secured credit card. Terms and conditions are just as applicable and enforced as they are with regular credit so it is important to see what you will be facing after the honeymoon phase.
Fee Fi Fo F… What are the fees for the secured credit card?! Is there an activation fee? Is there an annual fee? Is there a fee for speaking to a customer service rep? Will you be charged for inactivity if you do not use the card one month? Payment processing fee? Make sure your initial deposit is not eaten alive by enrolment fees, etc. Secured card fees can add up quickly so watch OUT!
Get interested in interest: Check the interest rate before signing any tri-folds and make sure the rate is not going to detonate after a certain promotional time frame or period. Obviously, look for a low interest rate and compare rates. AND…make sure it is in writing.
Read between the lines and the lines between those. Those 3 font tri-folds were not developed on accident. Most banks make it difficult and irritating to read all the terms and conditions, usually in an attempt to sway you away from reading the terms definitively.
Apply accordingly. Try not to apply for too many secured credit cards. One or two will suffice. Going overboard could cause your credit rating to decrease instead of increase over time. To spell it out, applying for too many secured cards is contradictive to the mission of building better credit.
Checka checka check it out. Ok. So you have your fancy secured credit card. You are done cursing about the fees and using your own money to establish credit and have come to terms with your position in the credit game. Now we need to make sure someone is keeping score.
Be sure to check your credit report a couple months after establishing the secured account. The account should be reporting to the credit bureau and positing with all 3 credit reports. If not, contact the lender and find out WTF the problem is and how they can fix it – ASAP. If possible, it is a good idea to find this out before establishing the account. Honestly, if the activity is not reported to the credit bureau on a consistent basis the effort is then a waste.
There are many ways to build a better credit score. A secured credit card is just 1 of a few ways a consumer can begin to establish credit or rebuild a bad rating over time. Consolidating unsecured credit cards can also help combat bad scores and help improve credit over time. Unsecured accounts consolidated with a non-profit receive a lower fixed interest rate and usually a lower monthly payment. This enables a consumer to pay off their credit debts at an affordable cost and a decent rate, lowering the debt amounts faster and establishing a positive consistent payment history. Utilizing both can accelerate your efforts to build a better credit score and help you be debt free from unsecured debts. Contact a certified credit counselor at 800.905.1563 or visit our website for more information about debt consolidation and building a better credit score.