There are many types of credit cards available in the market now and secured credit cards is also one of them. Secured credit cards can help you to control your spending, since you must have the money before you can make a purchase, unlike a traditional credit card that allows you to make your purchases even if you don’t have any money.
Many people find secured credit cards to be the best option. People having a bad credit history choose this card as for them getting a regular credit card from a bank would be difficult.
Why should you get a Secured Credit Card?
If you are thinking that why should you go for a credit card at all, when you have the cash available to fund your secured credit card, then you must realize that having a credit card has its own advantages.
In our modern times, it is becoming increasingly difficult to do certain things without having access to a credit card. A credit card has become necessary for doing many things such as renting a car, purchasing an airplane ticket or booking a hotel room. Thus with secured credit card, you will be able to do all these things and much more, having the same power of a normal credit card, but the benefit of not going under debt.
How do Secured Credit Cards work?
Secured credit cards work in the same manner as a checking account debit card; but there is no actual checking or savings account associated with the card. You deposit a certain amount of money to the company that issues the secured credit card, and that becomes your spending limit. When you have made purchases that reach the amount of money you deposited, you can no longer use the card. You have to deposit more money in order to continue using the card.
Advantages of a Secured Credit Card
There are many advantages of using a secured credit card such as:
- You cannot spend more money than you actually have, so there is no chance of going into debt.
- Almost everyone is eligible to obtain a secured credit card, regardless of your personal financial history and credit score. The only actual requirement to get a secured card is that you must be of legal age and have money to deposit on the card.
- Secured credit cards are great options for teaching your teenagers and college students about responsible financial spending.
- You will not be charged an annual percentage rate on the amount that you deposit, and you can have your paycheck deposited directly onto a secured credit card in many instances.
- A traditional credit card will charge you high interest rates, late fees and finance charges over time, and you’ll end up paying two to three times what you’ve actually charged to the card! With a secured card, you know exactly how much you’re paying for an item.
- Secured cards allow you to make purchases online easily.
Disadvantage of Secured Credit Card
With secured credit cards, you have to have the money in advance for any purchase you want to make. Although this is considered an advantage keeping in mind your credit score and the perfect way to avoid getting into debt too deep for you to handle, it is also a disadvantage in the event of an emergency situation.
For example in case your car breaks down, or your home’s furnace dies, and you don’t have the cash available, a traditional credit card would come in handy but if you are out of limit on secured one, you wont be able to use it. But maybe if you don’t use traditional credit cards, you will be able to save enough money to rescue yourself from such emergency situations.
Secured credit cards may be the best option for your credit card needs. They allow you to travel conveniently, make purchases by phone or the Internet, and do not have any dangerous prospects of using them.
