Not all credit card are created equal. Some allow you to earn cash, airline miles, and other perks, while others help you build or rebuild your bankroll.
At least that’s the case with secured credit cards.
If you have bad credit or no credit history at all, a secured credit card can be a great way to create a positive payment history and build a credit score. Online marketplaces can also help you repair your credit. Sign up for a free consultation now.
What is a secured credit card?
A secured credit card is a card that is secured by a security deposit. You make an initial deposit—usually anywhere from $50 to $300—with the credit card issuer and receive a line of credit equal to that amount. (For example, if you deposit $150, your card has a spending limit of $150).
You can then use your credit card to make purchases like any other card and pay it off each month through your card issuer. You then report these payments to the three major credit reporting agencies – Experian, Equifax and TransUnion, which can help you build credit and improve your credit score.
If you’re not sure what your current credit score is, don’t worry: There are several ways to easily check your credit (and overall credit) using online tools.
Most secured credit cards deposits are refundable, so if you close your account or show a good history of on-time payments, you’ll get your money back. Some secure cards also have a conversion component that allows you to switch from a secure card to a traditional credit card after a period of time – usually a few months (or more).
How to get a secured credit cards
To get a secured credit cards, you must complete an application with the credit cards company. Most major banks and card issuers offer secure cards. You can compare and contrast issuers and card offers through online marketplaces to see which one is best for you. If you are concerned about your current credit score, you should consider seeking professional advice. There are companies that can help you repair your credit, improve your credit, and prepare for a prosperous financial future.
Because secure cards are designed to help you build credit, most credit card companies don’t require a minimum credit score to qualify. However, approval is never guaranteed and you will need to provide some personal information when applying, such as your social security number, address and bank account details. Also, you must be at least 18 years old.
How can I get the most out of my secured credit cards?
To get the most out of your secured credit cards, it’s important that you pay the balance each month by the specified due date. Since your card issuer reports your payments to the credit bureau, non-payment (or late payments) can affect your credit score and lower your credit score.
Generally speaking, according to Experian, you can expect to build a solid credit score in about six months if you pay consistently and on time. Most secured cards have credit monitoring features that allow you to track your credit history over time. If your card doesn’t have this feature, you should be able to get a credit check through your bank, or you can always buy an assessment from Equifax, TransUnion or Experian.