But what is a secured credit card? Why is it considered a bad credit credit card? How does it work? And how can you use it properly? The answers to these questions will be tackled on the next parts of this article.

What are Secured Credit Cards?

Secured credit cards are special types of credit cards. Before you can use this card to pay for your purchases and even bills, you have to come up with an initial deposit first. The initial cash-out actually serves two important functions. First, it acts as the collateral for the use of the credit card. Should the cardholder default on his secured credit card payments, the lender can tap on the initial deposit to settle the unpaid charges. Second, the initial deposit acts as the credit limit for the card. Thus, a cardholder can only spend as much as he deposited on his credit card.

How a Secured Credit Card Works

As was mentioned above, a secured credit card functions just like any other credit card. You can use it wherever credit cards are accepted to buy products and to pay for services.

Still, secured credit cards are unique. This is because they are usually offered to people with bad credit history or no credit at all. Issuers of these cards do not normally require applicants to have good credit rating. Instead, they just require applicants to submit identification documents and fill out application forms. Also, applicants need to pay application fees, processing fees and annual fees for them to get approved for this card.

Because they are usually offered to people with bad credit history, secured credit cards are also called bad credit credit cards.  Now how can you use a bad credit credit card in a proper way? Let us find out how.

Tips on Using a Secured Credit Card Properly

1.    Keep your charges minimal. Your main purpose in getting a credit card for bad credit is to build positive credit history. So avoid using it on large purchases. Instead make use of your secured credit card in making small purchases that you can pay off right away.

2.    Employ good credit habits. Remember to pay all your charges in full and on-time every month. This will not just help you avoid debt build-up. Doing this will also help you improve your credit history. By managing your credit card properly, you can be assured of regaining credit worthiness.

3.    Use your card to qualify for unsecured credit cards. People usually take secured credit cards to get approved for unsecured credit cards in the future. This is because lenders usually look at how you managed your credit card for bad credit as basis for being eligible for unsecured credit card programs. If you pay your credit charges on time for a whole year or two, lenders will see you as a qualified holder of an unsecured credit card.

About the Author

Tara Tiemann is a credit analyst of Go-prepaid.com and has been a resource site for people who want to live debt free! If your on a budget using prepaid debit cards, pre paid credit cards and prepaid cell phone service can save you big money!

Still a lot of people are hesitant to use credit cards. If you belong to this set of people, who do not have credit history, allow us to provide reasons why you need to secure your own credit card for no credit history, otherwise known as secured credit cards.

Reason 1: Transactional Requirements

We cannot deny the fact that a lot of shops and business establishments today require people to use credit cards. Airlines, car rental services, hotels and even online shops transact with their customers using credit cards.

These business establishments require their customers to provide their credit card numbers, despite the fact that these customers are very much capable of paying for their reservations and purchases in cash. So, in order for you to enjoy the services and products of these commercial shops, you need to have your own secured credit card.

Actually it is relatively easy to get credit cards for no credit history or secured credit cards. An applicant just needs to open an account, deposit a minimum of $300 to that account, process the necessary documents for an application for secured cards, pay the processing and administrative fees, and soon he or she could enjoy the benefits of using his or her own credit card.

Reason 2: Need to Build Credit History.

Of course, it is not safe to assume that you wouldn’t need credit in the very near future. Domestic emergencies and other immediate needs may soon require you to request for credit lines from lending firms and banks. But if you do not have any credit history, most of these firms will shy away from extending you credit.

So you might as well get a secured credit card today, make purchases, and ensure that you pay off each monthly charge. This will help you establish your credibility as a debtor with excellent credit ratings, and eventually you will find banks and lending firms eager to extend you credit.

Of course these are but two of the reasons why you need to apply immediately for secured credit cards. But we hope that through the reasons enumerated above, you now realize the importance of securing your very own credit card.

About the Author

Tara Tiemann is a credit analyst of Go-prepaid.com and has been a resource site for people who want to live debt free! If your on a budget using prepaid debit cards, pre paid credit cards and prepaid cell phone service can save you big money!

Do you also worry about bad credit? But do you want to re-establish your credit history? Well, worry no more, because this article will discuss what you can do to rebuild credit. This can be done by applying for secured credit cards.

What Secured Credit Cards Are

Secured credit cards, also known as credit cards for no credit, is a credit program offered to individuals who are yet to establish their credit history and to those who may have histories of bad credit.

This credit card program usually requires applicants to provide collateral, in a form of an initial deposit. This initial cash deposit actually serves two important functions. First it serves as the credit limit for secured credit card. This means that you can only charge your purchases and bills on the card only up to the value you have deposited onto the credit card account. If you were required to deposit $200, this will be the maximum amount of credit you can charge to you card. You cannot go over this limit. If you do so, your credit transaction will be declined, and you may be charged with declined transaction fees.

The second purpose of the collateral is for security. Should you default on your payments; the credit card company can tap into your initial deposit to pay for your unsettled charges.

Credit cards for no credit or bad credit usually have the following requirements: a checking or savings account, and a filled out application form. Lenders may also ask applicants for secured credit cards to provide proof of their employment as well as identification papers.

A negative aspect of credit cards for no credit is that some may have high interest rates and fees. Aside from paying processing fees, cardholders must pay significant amounts for interest. Still, it is important to note that such fees and rates may just be temporary. As long as you prove yourself worthy of credit, you can expect a reduction of these rates and charges.

Secured Credit Cards – Beneficial for Bad Credit?

How can you benefit from getting a secured credit card? Well, this card can allow you to succeed in your battle with bad credit. You can re-establish your credit reputation as long as you consistently pay your debt installments on time.

In so doing, you can increase your credit score and this will in turn expand your credit prospects. As long as you maintain good payment habits you can expect to qualify for low interest credit and excellent loan opportunities in the future

Secured credit cards are also excellent tools to help people manage their finances. Through these cards, you can control your spending habits. After all, you can only make purchases as long as there is available cash on your credit card. This will surely help people free themselves from uncontrolled debts and the credit worries associated with them.

About the Author

Tara Tiemann is a credit analyst of Go-prepaid.com and has been a resource site for people who want to live debt free! If your on a budget using prepaid debit cards, pre paid credit cards and prepaid cell phone service can save you big money!

1. What is a secured credit card?
It is a type of credit card that is created for people with bad credit or no credit history.  To make up for the risk, the applicant is required to submit a deposit.  The amount of deposit will also define the secured cardholder’s credit line.

2. How do I apply for a secured credit card?
Some banks and credit card issuers offer a secured credit card.  You can personally apply from your local bank or send an application online.  If you are a member of a credit union, you may inquire if your Union offers a secured credit card to enjoy lower interest rate and fees compared to commercial Issuers.

3. What fees should you be aware of?
Some secured credit cards charge an application fee while others may not.  Although all secured credit cards carry annual fees, you should be able to find a card with a reasonable annual fee by doing your research.  Carefully examine the fine print to make sure that there are no hidden charges.

4. How much is the security deposit?
The security deposit may runs from $300 to $500, depending on the Issuer. If you need a higher credit limit, be prepared to raise your cash deposit as well.

5. Can a secured credit card help me get out of bad credit?
Yes.  A secured credit card can be used for rebuilding bad credit but this will depend on the kind of card you choose and how you will use it.  To rebuild credit, you must use your secured regularly.  However, it is important to pay back your charges on time at all times.  More importantly, you need to make sure that your payments will be promptly reported to all three major credit bureaus as it is the only way you can raise your credit score.

6. Will others know that I’m using a credit card for bad credit?
No.  Your card will not show any sign or print indicating that you are using a secured account because you have bad credit history.  That information is exclusively between you and your secured card Issuer only.

7. Will my deposit earn interest?
Some Issuers place the security deposit in a timed deposit account to earn interest.  Before choosing a secured card, understand how long your money has to stay in the deposit account should you want to terminate your secured card.  Furthermore, understand if you can keep the interest your money earned or if it will go to your card’s Issuer.

8. Can I get an upgrade to unsecured credit card?
Some issuers will automatically upgrade your account to an unsecured credit card after a year of consistent payments.  You can also request for an upgrade if you think you have proven your credibility as a cardholder.

About the Author

Tara Tiemann is a credit analyst of Go-prepaid.com and has been a resource site for people who want to live debt free! If your on a budget using prepaid debit cards, pre paid credit cards and prepaid cell phone service can save you big money!

However, people with low or bad credit scores find it difficult to qualify for a traditional credit card. The next best option for them is to apply for secured credit cards.

FAQs about Secured Credit Cards

What is a Secured Credit Card? A secured credit card is like a traditional credit card except for one thing – a person applying for this type of credit card is required to deposit a certain amount of cash that will serve as guarantee for debts. The deposit will also determine the cardholder’s credit line.

If the cardholder can show an impressive performance for at least 6 consecutive months, the secured card issuer may raise his/her credit line without requiring for additional deposit.

Where can I get one? Check out websites of different credit card companies offering secured credit cards. Most issuers offer free online application. You can also compare the rate of interest and fees online. Another way is to consult your bank.

How much money do I have to deposit? This will actually depend on the credit card issuer. Some issuers require a minimum of $300 while others may require at least $500 for deposit.

What are the other charges or fees I have to pay? You will need to pay an annual fee to keep your account open. Secured credit cards often come with higher fees and interest rates. It is highly recommended to do your own research, shop for possible options and compare.

What are the things I should consider when choosing a Secured Credit Card? First, you have to check the interest rate and fees. Look-out for hidden charges. Second, read and understand the fine print before signing up.

Third, you should always make sure that the credit line you choose fits your budget or income. The last thing you should check is if the credit card issuer you chose reports to all three (3) major credit bureaus. If you are trying to improve your credit score, it is important to make sure that every single payment you make, is well-accounted for.

Are there problems I should be aware of? Using a secured credit card has its advantages and disadvantages.

• Advantages:

1.Anyone can apply even people with bad credit.

2.Great way to rebuild a bad credit history.

• Disadvantages:

Since most people who apply for secured credit cards are individuals with bad credit:

You may be required to pay an upfront fee what they call receiving “guaranteed” credit cards.

The interest rates and penalties are higher than unsecured credit cards.

How long will it take before I can qualify for an unsecured credit card? The average time is about a year. This will, again, depend on the issuer.

How TO Use Your Secured Credit Cards to Your Advantage

It is a must to always use your credit card wisely. This type of freedom is sometimes abused. Some credit cardholders purchase items that are not really needed. Although a secured credit card prevents you for spending more than your credit line, maximizing your credit limit is discouraged.

Be sure to pay your monthly bills on time to prevent penalty fees. Since you are aiming to rebuild your credit history, you need to alert about your payment habits.

About the Author

Tara Tiemann is a credit analyst of Go-prepaid.com and has been a resource site for people who want to live debt free! If your on a budget using prepaid debit cards, pre paid credit cards and prepaid cell phone service can save you big money!

What is a Secured Credit Card?

A person who wants to open a secured credit card account must first make a deposit in his/her savings account. This will serve as a guarantee in case the cardholder fails to pay charges on time. The security deposit required varies, depending on the issuer.

The cash deposit will also determine the value of the cardholder’s credit limit. Some issuers will match the exact value of the deposit while other issuers may offer a slightly lower or higher limit than the amount of deposit made.

Take note that secured cards are different from prepaid debit cards. Thus, if you fail to pay off your monthly balance in full, you will incur the additional interest rate charge.

Why Apply for Secured Credit Cards?

A secured card is recommended for people who yet to establish credit history. Application and approval is easy as long as you can submit the required security deposit. On the other hand, if your credit rating has been damaged, you will need a secured credit card to rebuild it.

What about those who have just filed for bankruptcy? If you have a record of bankruptcy, you may have to wait until it has been discharged before you can apply for a secured credit card. Nevertheless, as soon as you are discharged, a secured credit card is the perfect tool to re-establish your damaged credit history.

Aside from quick approval, one great advantage of using a secured credit card is that it can help keep your spending in check. Because exceeding your credit limit is not option, the cardholder can become more conscious about his/her expenses.

Of course, secured credit cards can be used for payment or purchase anywhere regular credit cards are accepted. No one even has to know that you are using a secured account. That fact is only be between you and your credit card company.

Shopping for the Right Secured Credit Cards

The ideal secured credit card should have minimal fees. Most secured cards do carry annual fees so pick out one with an acceptable annual fee charge. Avoid credit cards that require miscellaneous or hidden charges.

Secured cards are also expected to have slightly higher interest than unsecured cards. By doing comparisons, you should be able to find one with a reasonable APR.

Spend time reading the fine print. You should clearly understand the Terms and Conditions of your chosen issuer before signing up. In addition, make sure that your payments will be reported to the major credit bureaus as it is the only way you can build/rebuild your credit history.

About the Author

Tara Tiemann is a credit analyst of Go-prepaid.com and has been a resource site for people who want to live debt free! If your on a budget using prepaid debit cards, pre paid credit cards and prepaid cell phone service can save you big money!

However, there are circumstances that may lead us to bad credit. It is not always because a person has an over-spending habit. Sometimes bad credit is a result of an unexpected events such as illness, divorce, lost of job, etc. Whatever the reason is, there is still a chance to repair a bad credit history.

Secured Credit Cards

Some people may think that getting a new credit card to recover from bad credit is a wrong move. Yet, if done the right way, it can actually be an effective step to rebuild bad credit.

Credit cards for people with bad credit? Yes, this is possible. Many credit card companies are offering bad credit credit cards or secured credit cards.

A secured credit cards are just like a traditional credit card in the sense that you can use it for making purchases or paying bills. However, you must deposit a sum of money which acts as security for your debts. If you cannot pay on time, the bank will use your cash deposit to pay off your debts. The amount you deposited will act as your credit limit as well.

How Secured Credit Cards Increase Your Credit Score

Most secured credit cards offer credit reporting to the three (3) major credit bureaus. Paying on time and avoiding exceeding your credit limit will surely improve your credit rating. Be sure to understand how you are being scored so you can work on the improvement of your personal credit history.

How to Apply for a Secured Credit Cards

The easiest way to look and apply for a credit card for bad credit is to search the internet. Most credit card companies offer online applications making the application processes faster and easier.

Disadvantages of Secured Credit Cards

Due to the high risk involved, most credit cards for bad credit come with higher fees and interest rates. There are credit card companies that charge application fees, processing fees and annual fees.

Is it worth getting a secured credit card if you have bad credit? Yes, it is. Despite having to pay higher fees and interest rates plus submitting a deposit, secured credit cards can really help you repair your credit history.

With regards to higher fees and interest rates, you just need to shop around for choices and compare your possible options before choosing the best deal. Remember to always make payments on time to avoid penalties and incurring negative remarks on your credit report.

About the Author

Tara Tiemann is a credit analyst of Go-prepaid.com and has been a resource site for people who want to live debt free! If your on a budget using prepaid debit cards, pre paid credit cards and prepaid cell phone service can save you big money!

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However, they can apply for a secured credit card in order to fix their credit Before submitting your application, here are some important facts you need to know about this card:

Fees:

This type of card may involve fees such as processing fees and annual fees. Such charges may also vary from one credit card company to another. You need to check the fees before applying so you can avoid credit cards with very high charges.                                                          

Deposit:

Secured credit cards require a cash deposit which can range from $300- $500. There are secured credit cards with minimum and maximum deposit limits. Some issuers may place your cash deposit in an interest-bearing account. It that’s the case, see to it that you clearly understand the terms of your credit card issuer.

Your credit limit can either be the same as or exceed to the value of your deposit. However, there are instances when your credit limit may be less than your security deposit.

You can add money to your deposit so as to raise your credit line. As an incentive for being able to pay on time, some banks may increase your credit limit after a few months of consistent payment. The cash deposit will be used by the credit card issuer in case the cardholder fails to pay off charges on time.

Qualifications:

For those who want to apply for a secured credit card, the requirements may vary from one company to another. Aside from the security deposit, some credit card companies may impose specific qualifications on age or income bracket.

Payment Reports to the Credit Bureaus:

There are times when the card company does not report your payments to the three major credit bureaus and in such case, it does not help rebuild your credit rating. If you wish to rebuild your credit history, your payments should be reported to the credit bureaus.

Unsecured credit cards have lower fees, fewer restrictions and lower interest rates. Now, if you want to upgrade your secured credit cards to an unsecured credit card, it can be possible after a year of consistent payments.

About the Author

Tara Tiemann is a credit analyst of Go-prepaid.com and has been a resource site for people who want to live debt free! If your on a budget using prepaid debit cards, pre paid credit cards and prepaid cell phone service can save you big money!