Secured Credit Cards For Bad Credit

| January 3, 2012

Obtaining a secured credit card is a great alternative for those with bad credit. Some situations such as car rentals, require the use of a traditional credit card. For those with bad credit, obtaining a credit card can be nearly impossible. Reputable companies such as Capital One have begun a program offering secured credit cards for bad credit individuals. These cards look and act like a traditional credit card. Unlike a normal credit card which allows you an approved credit limit, secured cards require an upfront deposit. Once the deposit is made, the amount of the deposit becomes your credit limit. Each month the cards purchases will be billed similar to a traditional credit card and payment will be required. The deposit is held in the event of non-payment. When the card is closed the deposit is returned minus any fees or owed balances.

Secured credit cards open up a world that was previously unavailable to those with bad credit. Secured credit cards make it possible to rent cars, purchase airline flights, and shop online. Many retailers such as car rental companies and even video stores require a credit card before they render services. A secured credit card looks like a normal credit card and only the cardholder knows that it is secured. The amount of the deposit is the available credit limit in most cases although some companies do deduct fees out of the initial deposit for processing.

Should the cardholder find themselves in need of a higher credit limit they simply add additional funds to their deposit. Each month the purchases made on the card are billed to the account holder and they can then pay in full or make minimum monthly payments just as you would on a traditional credit card. This flexible payment option is great for those times when finances are a little tight.

One of the best benefits offered by secured credit cards is that they often have a program in place for upgrade to a normal credit card after a length of positive payment history. This is a great way to begin to establish a positive credit history for yourself to help negate some of your past mistakes.

It is important to understand the interest rate, fees, and responsibilities associated with a secured credit card before obtaining one. Many secured credit cards have a medium to high interest rate associated with them. It is also important to understand that your deposit is not a pre-payment but simply a way that the credit card company ensures they will receive payment should you fail to pay on time. Many times these cards have a zero tolerance for non-payment or late payments so be sure that you are able to pay your bill on time each month.

Secured credit cards for bad credit individuals can be a lifesaver. Building a positive credit history, the ability to rent cars, and flexible payment options often make them ideal for those with bad credit. Understanding all the terms and conditions is important, and once that is accomplished all that is left is to spend responsibly.

Category: Bad Credit Loan

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