Applying For A Secured Credit Card

Applying for a secured credit card is your best option if you have a bad credit history or no credit history at all. A secured credit card will help you establish your credit rating. If you have a really bad credit history, you will find it very difficult to get approved for an unsecured credit card. The lending companies do not want the risk of lending a person who does not have a blotless credit history.

A secured credit card is identical to the unsecured credit card and offers the same facilities as well as has the same charges. However, with a secured credit card, you have to pay the issuer company a deposit as security. This amount is the same amount as your credit line. The company takes this deposit so as to be sure that their money is not lost in case you default or declare bankruptcy.

Secured credit cards are similar to bank debit cards, only the money is not withdrawn immediately. Rather you, the card holder, pay your bill on a monthly basis. Secured credit cards are very close to prepaid cards since the money is paid beforehand. However, a prepaid card is loaded with any amount and every time funds are deposited a fee is deducted.

Not all companies have uniform provisions for a secured credit card. Some offer a limit that marginally exceeds your credit limit, some offer a limit which is lower than your deposit. If you want to get a secured credit card, research a bit to find out about the options. It might be just what you need.

Secured credit card is right choice for you if:

*you have a bad credit history

*you have pending student loans

*your spouse has a high debt ratio and you are now separated

*you declared bankruptcy

*you are starting on a new job

A secured credit card helps:

*establish credit ratings if you do not have a credit history

*re-establish your credit if you have bad credit or have had to declare bankruptcy

*in times of emergency by providing security

*you enjoy the benefits of an unsecured credit card

Disadvantages of secured credit cards:

*You are required an amount equal to or greater than your credit limit as a security deposit

*The amount you deposit is of no use to you until you acquire a good credit rating

*The interest on your security deposit might not be available to you

There are no freebies with the secured credit card. Since the applicant poses a potentially high threat, a higher APR is levied. This further increases the monthly payments, which are to be paid due to the previous bad credit history.

To sort out the confusion, keep the charged amounts low in the first year and try to pay off almost all the amount in time. The fastest way to increase or improve your credit rating is to make payments on or before time and also pay some interest. An intelligent use of the secured credit card will improve your credit rating and soon you will have a good credit rating.