Having bad credit can haunt you for quite some time and may block many ways for you. It is extremely difficult to get approved for a loan or even a credit card if you have bad credit. You may feel that all financial doors are closed. But the good news is that it is not only possible to get a credit card with bad credit, but you can also use it to help rebuild your credit.
Secured Credit Cards
Secured credit cards are a great way for people with bad credit to get access to credit that they need, but can’t get through traditional means. The good thing about these cards is that anyone can get approved because these cards pose no risk to the card issuer. The borrower had to deposit a certain amount of money into a bank account and that amount becomes the security. If the borrower defaults on their card payment, the funds are used to cover the outstanding balance.
What amount is required as security deposit?
The amount of the required security deposit varies from $200 to $1000 depending upon the issuer. As a result, the credit limit will also be equal to the amount deposited in the security account.
Things to consider when you get a Secured Credit Card
Make sure that the card issuer reports timely payments to the major credit bureaus
It is important to make sure that the card issuer reports timely payments to the major credit bureaus. This is because all your efforts will go in vain if they don’t.
Make your payments on time
Once you’ve ensured that your repayments will be reported, make it a point to give your payments a priority. It is better to use the credit card for small purchases, and pay off the balance in full at the end of the month. If you follow this regularly for six months to a year, your credit score will surely improve and the card issuer might raise your credit limit.
Read the terms and conditions carefully
Similar to other credit cards, secured credit cards can also have some heavy fees and interest rates. This is mainly due to the amount of risk the lender is taking by giving the borrower a credit card. It is important to read all the terms and conditions carefully before signing the agreement as some of these cards can have truly predatory terms. Also never pay more to open an account than you will receive as a credit limit.
The good news is that there is pending legislation that will limit the so-called “fee harvesting” credit cards. These are the ones that charge the cardholder overpriced fees without giving them a significant amount of credit. If you even feel that a dishonest lender is dodging you, move on to another one instead of getting deceived.
