Secured Credit Card
A secured credit card requires that a deposit be made that is applied toward the credit limit of the card itself. The deposit can be anywhere from 10% to 100% of the total of credit. This will be kept in an escrow account in case the holder of the credit does not make regular payments. Because this type of credit card does not pose much risk to a creditor, they are much easier to obtain and can help those who do not qualify for unsecured cards.
A secured credit card can be used just like a regular credit card. You will receive a bill each month. The balance does not have to be paid off each month; you are given the option of carrying the balance and paying interest on it. This can be done as long as you pay the minimum payment required each month and your balance does not go over your credit limit.
If you have no credit or damaged credit, a secured credit card is a good option. It is best to only charge on this card as much as you can pay off at the end of each month. Regular payments that are made on time are very important when trying to establish or improve credit.
Benefits of a secured credit card:
1. Establishes credit.
2. Improves credit.
3. The credit limit cannot be exceeded.
4. Useful for items that require a credit card.
5. Deposit applied to credit card reflects in the interest rate.
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