To apply for secured credit cards you need two basic things, several hundred dollars to deposit as collateral and a credit rating that is not extremely poor. Secured credit cards are a great way to rebuild poor credit or establish new credit. However, be aware that there are some conditions, which could cause a bank to decline your application.
If you’re interested in secured credit cards, use our online credit card finder to compare those you might qualify for.
According to information published on Bankrate.com, not every credit card issuer is willing to deal in secured credit cards. In fact, a growing trend among banks is to discourage secured credit cards in favor of standard credit cards with lower limits, higher interest rates, and annual credit card fees. Though no reason is given, it may be a case of secured cards limiting the amount of spending consumers engage in, which it is counterproductive to the goals of credit card companies.
Why do I need to make a cash deposit for secured credit card?
The Federal Trade Commission defines a secured credit card as one that requires you to deposit and maintain a certain amount of money in a savings account, which acts as collateral for any debts charged to the card. In other words, you might deposit $500 with the company issuing the card which can be seized by them should you fail to make payment on your monthly bills. In most cases, whatever you deposit with the issuer will equal the amount of your credit limit.
By requiring a cash deposit, the bank issuing the credit card greatly reduces its risk of loss in case you should default. However, by law the bank is restricted from touching that money if you make good on your monthly payments. It must remain in an interest-bearing savings account with all proceeds returning to you should you decide to close the account or upgrade to a standard credit card.
How good is my credit need to be for secured card?
As a rule, poor credit should not keep you from getting a secured credit card. An exception is a situation in which your credit history is deemed extremely poor. For example, a history of defaults on several credit cards combined with a foreclosure or car repossession might be severe enough to cause a decline. But as long as your credit issues are not extremely serious, you should be okay.
One thing to consider when getting an unsecured credit card is that your credit history will usually determine:
- Your interest rate
- How much you will be allowed to deposit
- Whether you’ll pay any annual fees
Your credit history will also determine the length of time you must use a secured card before the bank will offer you an upgrade to a standard card. Generally, the time limit is a minimum of one year; it can be greater under certain conditions.
Is there anything I should be concerned about when applying for secured credit cards?
When it comes to companies offering secured credit cards there are good ones and bad ones. The good companies treat their customers well and offer fair terms and reasonable interest rates. However, there are a handful of bad companies that seem good on the surface only to turn be bad underneath. Many times bad credit card companies take advantage of those with poor credit histories by preying on them and their tendency to spend money.
According to the most recent survey offered by Consumer Action, secured credit card consumer abuse is alive and well in the United States. They specifically cite two cards they found during the research that impose a $75 annual fee and an interest rate of nearly 50%. Companies like these take advantage of the fact that consumers are careless about reading disclosure forms when signing up for credit cards. Such consumers certainly have their eyes opened when they receive their first bill in the mail.
The best way to avoid being abused by a credit card company is to take the time to read all the fine print. Since you’re under no obligation to fill out and submit an application, you have all the time the world to look it over.
If you don’t understand the language of the credit card application, don’t be afraid to ask someone else who’s had plenty of credit card experience. You can even take the application to your bank and speak with a CSR about it. As a bonus, your bank might be able to make you a better offer while you’re there.
Use the credit card chaser to easily compare secured credit cards.
- Applied Bank Platinum Zero Card
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- Amalgamated Bank MasterCard Secured Standard
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- Where can I compare secured credit card options?
- Premier America Credit Union MasterCard Secured Standard Credit Card