Secured Credit Card

Are you tired of defaulting on your credit card payments time and again? Is your credit history suffering from an irregular payment pattern and are you suffering from high finance charges on your credit card? Welcome to the world of secured credit cards, your one stop answer for all the credit card woes.

Let us first know what a Secured Credit Card is. No, it is not yet anther way of protecting your card from some kind of theft. Instead, it is a card made secured against the potential damage you yourself could cause to it by not making payments.

What is a Secured Credit Card?

A Secured Credit Card is one in which the applicant makes a deposit at the time of application which is later used for covering up for a missed payment. The deposit is made with the credit card company and is usually equal or lesser than the credit limit of the card. It is a very good option for people who are not very disciplined about making a payment and usually suffer from huge finance charges and the torture of collection recovery agents.

How Does a Secured Credit Card Work?

A deposit against the credit limit of the card is made by the applicant before getting the card. If the cardholder faults in making a payment then the credit card provider has the right to take the monthly payment from the deposited amount. The delinquency level at which the company would take a payment from the deposit differs from provider to provider. Usually it is only after missing of 4-5 subsequent payments that the deposit is used.

The Pros and Cons of a Secured Credit Card.

A secured Credit Card is a boon in many ways. It not only ensures that you do not default beyond a certain limit on your card but also prevents you from suffering huge finance charges. It is like a pre payment that you make to cover up for a missed payment and gives you immense peace of mind! It prevents your card to get into late stages of delinquency where you start getting annoying phone calls and even visits from collection agents and saves you a lot of trouble. The bonus is that some companies even provide you with an interest on the deposit you make on the card. So while your money is resting for saving you from bad credit, it will also earn some more moolah for you!

The only concerns you could have with having a Secured Credit Card could be a high application fee and a high annual fee that comes with it. You could also be charged with a processing fee if you want to apply for such a card. The best way is to find out before hand about the cost included and steer clear from cards with heavy fees as eventually, they will eat up from the deposits you make. Also, it is a bad idea to apply for a card with a deposit higher than your credit limit and no interest also.

Good to Know

Another good thing to know about Secured Credit Cards is that in most of the cases, they can be converted to normal, unsecured cards once you think you are stable enough.

They are also a very good way to improve your payment profile and in countries where a systematic credit bureau works, it comes across as a very handy tool to regain your credit worth. All in all, it is an excellent option for people who need a credit card but forget to make a timely payment and suffer the damages!