What Is A Secured Credit Card?
Secured credit cards look like regular cards, but they aren’t technically the same. Because credit is essentially a loan extended to you by the card issuer, requiring you to pay it back on time, these cards aren’t really proper credit cards.
If you pay off your conventional credit card withing a billing cycle, you won’t have to pay any interest. However, you might still have to pay annual fees. The benefit of credit cards is that they allow you to buy things immediately, even ones you wouldn’t necessarily be able to buy without saving up several paychecks.
That’s hard to do if that ‘thing’ is fixing your car’s transmissions or taking someone special on a weekend getaway. Credit cards are also a matter of massive convenience and prestige.
The ability to pay with plastic is one way to look like you’ve got things under control without the need to carry around a lot of cash. Lots of people use their credit cards every day.
However, if you’ve had bad luck in the past, or made a few mistakes, you might not be able to get a regular credit card, because of your credit rating. If this is the case, a secured credit card could be a big help.
You can still get the benefits of convenience and prestige without the credit card companies really giving you a loan. Essentially, you put up the money in advance. The amount you put in is effectively your spending limit, so you can’t really get yourself into trouble in the same way as a regular credit card.
Also, it’s a great way to rebuild less than stellar credit, provided the issuer (company) that provides the secured credit card report to the credit bureaus. While the secured card won’t let you ‘go big’ on things beyond the cash you put in… you’ll get all the convenience and prestige of having plastic, and you can fix up that credit at the same time.
If you’re thinking about getting a secured credit card to help build your credit, make sure that on-time payments are reported to the appropriate credit bureaus. Companies that don’t report this won’t help your credit. However, if you’re looking for convenience and some insurance against spending too much, just about any secured credit card will work. Look for one that requires as little as possible in fees and other charges.
Filed under: Business