Benefits Of A Secured Credit Card

Using credit cards can help you achieve your credit-building goals. When used responsibly, credit cards may even be able to help you establish credit without going into debt. However, there is one potential drawback to this credit-building strategy. It may be challenging to be approved for a new credit card account if your credit history is poor or nonexistent. Due to your current credit situation, some credit card companies might not want to work with you.

What is a secured credit card?

The term "secured credit card" refers to a particular kind of credit card account that you "secure" with a deposit of your own money. Your deposit acts as collateral for the bank that will be issuing you a credit card.

Generally, the credit limit you receive on a secured credit card is equal to the cash deposit you make when you open the account. On the other hand, some card issuers, such as Self, may allow you to access an extra unsecured credit limit boost to supplement your deposit. In these cases, your credit limit may exceed the size of your deposit.

Benefits of having a secured credit card.

You can rent a car if you have a secured credit card. In fact, they have a lot of offers. Here are some of the advantages of getting a secured credit card that you may find appealing.

Refundable deposits:

The cash deposit you make to open a secured credit card should be refunded. In some circumstances, the cardholder's account may be converted to an unsecured credit card by the card issuer or credit card provider after a predetermined time. You might be able to get your refundable security deposit back from other lenders when you close your account in the future.

Prevent interest charges:

You can prevent paying interest on a secured credit card account by sticking to one straightforward rule, just like with unsecured credit cards. Make sure to settle your entire statement balance by the due date each month. You should be able to use your account without having to pay expensive interest rate fees as long as you don't have a balance over from one billing period to the next.

Fraud protection:

One of the safest forms of payment for customers is a credit card, whether secured or unsecured. If anybody uses your credit card without your approval the Fair Credit Billing Act limits your liability for fraudulent charges. Additionally, the majority of credit card networks offer zero liability protections if you fall victim to fraud or credit card theft.

Conclusion

Credit cards with a cash deposit as security are known as secured credit cards. This lowers the risk of lending to borrowers with bad or limited credit reports, and these borrowers can use secured credit cards to raise their credit scores. Thus, secured credit cards typically have high fees and interest rates, but they can help borrowers build their credit history and gain access to cheaper credit options. Secured cards are an excellent option for those with bad or no credit because you don't need exceptional credit to be approved. It's important to use a secured credit card responsibly, just like you would with any other credit.

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