Do you want to know how secured credit cards work? From Responsible Economy, we show you how they work and all the information you need to know. Let’s get started!
A secured credit card is a credit card that requires a security deposit. This deposit is used as collateral for the lender in case the cardholder does not pay their balance.
Secured credit cards can be a good option for people who have a poor credit history or no credit at all. By using a secured credit card and paying your balances on time, you can help improve your credit history.
How to use a secured credit card
Once you have a secured credit card, you can use it like any other credit card. You can use it to purchase goods and services online or in person.
It is important to pay your balances on time and in full so that you can improve your credit history. If you do not pay your balances on time, you may be charged interest and additional fees.
Additional details
When you apply for a secured credit card, the card issuer will ask you to deposit a certain amount of money, such as $200 or $500. This deposit will be used as collateral for the lender in case you do not pay your balance.
For example, if you apply for a secured credit card with a credit limit of $500, you will need to deposit $500. If you do not pay your balance, the lender can use your deposit to cover the debt.
Once you have been approved for a secured credit card, you will be able to use it like any other credit card. You can use it to purchase goods and services online or in person.
It is important to pay your balances on time and in full so that you can improve your credit history. If you do not pay your balances on time, you may be charged interest and additional fees.
Here are some examples of how you can use a secured credit card to improve your credit history:
- You can use it to purchase essential items, such as food and gas.
- You can use it to make monthly payments, such as rent or utilities.
- You can use it to pay medical or education bills.
By using a secured credit card responsibly, you can show lenders that you are a good payer. This can help you increase your credit score and qualify for better credit cards in the future.
How to get a secured credit card
To get a secured credit card, you will need to meet the following requirements:
- Be at least 18 years old
- Have a steady income
- Provide a security deposit
The size of the security deposit will depend on your credit history and the amount of credit you apply for. In general, the security deposit will be equal to or greater than the credit limit of the card.
Here is a ranking of the best secured credit cards in the United States:
- Fees: $0
- Cashback: 1.5%
- Welcome bonus: $0
- Credit Score: No
- Fees: $0
- Cashback: 1%-5%
- Welcome bonus: up to $300
- Credit Score: 690-850
- Fees: 0
- Cashback: No
- Welcome bonus: No
- Credit Score: No
- Fees: 0
- Cashback: Up to 3%
- Initial deposit: $200-$5,000
- Welcome bonus: No
- Credit Score: No
- Fees: 0
- Cashback: 0%
- Initial deposit: $300
- Welcome bonus: No
- Credit Score: No
- Fees: 0
- Cashback: 0%
- Initial deposit: $200-$5,000
- Welcome bonus: No
- Credit Score: No
- Fees: $35
- Cashback: 0%
- Initial deposit: $200
- Welcome bonus: No
- Credit Score: No
- Fees: 0
- Cashback: 1,5%
- Initial deposit: $200-$5,000
- Welcome bonus: No
- Credit Score: No
- Fees: 0
- Cashback: 1,5%
- Initial deposit: $200-$5,000
- Welcome bonus: No
- Credit Score: No
Advantages
Secured credit cards offer several advantages, including:
- Can help improve your credit history
- Do not require good credit history
- Can be a good option for people with low credit scores
Disadvantages
Secured credit cards also have some disadvantages, including:
- Require a security deposit
- May have higher interest rates than traditional credit cards
- May have lower credit limits than traditional credit cards
Conclusion
A secured credit card can be a good option for people with a poor credit history or no credit at all. However, it is important to understand the pros and cons before applying for a secured credit card.
Things to keep in mind
- Secured credit cards typically have higher interest rates than traditional credit cards.
- Secured credit cards typically have lower credit limits than traditional credit cards.
- Secured credit cards may require a higher security deposit if you have a poor credit history.
If you are considering getting a secured credit card, it is important to compare the available options to find the card that is right for you.
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Updated the day 1 September, 2023 by Alfredo Barandiarán
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