Guaranteed credit cards are credit cards that are guaranteed by the money that you place into an account for that card. In many cases, you will find that they are called secured credit cards. Often creditors will call them guaranteed credit cards because you are guaranteed to qualify for the card.
There is another type of guaranteed credit card as well. This credit card is a car offered by a specific merchant that provides a card for their, typically online, store. This will be discussed later in this article.
Who are guaranteed credit cards best for?
There are three groups of people who benefit the most from guaranteed credit cards. These are:
- People who have no established credit
- People who have no way to verify their income
- People who have very bad credit
In all cases, you would not be able to qualify for a traditional credit card.
People who don’t have any established credit but have had a job for more than 6 months should first try to get a credit card that specifically geared towards people with no credit. There is no reason to get a secured credit card if you can qualify for a traditional card. There are many credit card companies that are pre-qualifying people for credit cards without dinging their credit report, so this is something to consider.
If you are getting a secured credit card, then you need to understand that you will have to first come up with the cash to put into an account to secure your credit. You can typically open an account with as little as $200, but keep in mind that your credit limit will be based upon the amount that you deposit into your account.
What are merchant guaranteed credit cards?
Merchant guaranteed credit cards have been around for a while. These are credit cards that can only be used at that merchant and the cards are not major credit cards. These cards are not the same as a department store credit card as virtually anyone can get these merchant cards.
How they work is that you are offered a credit limit of say $10,000. You go onto the merchant site and you find a variety of merchandise from home products to computers, clothing, and even things like TVs, boats and more. However, you don’t just get to pull out your credit card and make a purchase, you have to put a down payment on the item and then make some payments on it.
Typically, after you have paid off about half of the item, they ship it to you. It’s similar to layaway, but you don’t have to pay it all off to get it to your home.
In general, these types of merchants do not report your good spending habits to the credit reporting agencies. In addition, some who do claim to report your good standing don’t actually report to the major credit reporting companies, only smaller ones that aren’t actually used by major credit card companies.
What’s more, they may not have to comply with the Federal Reserve credit card rules because they are often registered as lenders not creditors and the rules for them are different.
Understanding the terms of any agreement that you are considering is important, especially if you are trying to establish or reestablish your credit.
Can I add my name to someone else’s account and rebuild my credit?
While in the past you could have added our name to someone else’s credit card account and benefited from their good credit, this is no longer the case. You have to establish credit history in your own name in order to get a credit benefit.
Now, this doesn’t mean that you cannot add your name to someone else’s account, if they agree, however, this will not impact your credit for good or for bad.
If you were to get a joint account with someone, however, this would have an impact on your credit. Just keep in mind that if the other person on your account spends irresponsibility that you are equally responsible for paying the bill. Your credit will be equally as affected if you don’t, no matter who creates the debt.
Lastly, if you are completely against getting a guaranteed credit card, you can see if you can find a cosigner to help you get a traditional credit card. Just keep in mind that your spending will affect that person’s credit just as much as yours will, even though they don’t have a credit card on your account.
- What is the point of a business secured credit card?
- Wells Fargo Secured Credit Card
- Who offers the best secured credit card rates?
- When do credit card companies report to credit agencies?
- Los Angeles Federal Credit Union Share Secured Platinum Plus Visa Credit Card
- What are some unsecured credit card companies?
- Earthmover Credit Union Visa Secured Credit Card