Credit cards are a constant weight of the people living in the society. A life without a credit card is unrealistic for most individuals. The society has been adapting to the buy now and pay later option, using the credit cards. Hence, people love using credit cards nowadays. However, not everyone can get a credit card whenever he wants. Availing one is a long procedure and quite difficult for those who do not have a good credit score or are taking it for the first time. This is where the secured credit cards come into the scene. So what is a secured credit card? Let’s find it out.
What is a Secured Credit Card?
To tackle the constant demand for new credit cards by new people, banks came up with the concept secured credit cards. In this concept, you can borrow a credit card from the bank account in exchange for a small deposit amount. This amount is termed collateral and is kept by the bank for security purposes. Hence, the secured credit card will help you to develop a Credit history. You can borrow money from this credit card and then be easily anywhere and then simply repay the credit card bill. This will add to your credit score and will help you in the long term.
Secured credit cards are mostly helpful for college going students who have little or no credit history. Hence, you can easily get these kinds of credit cards numbered depositing a small amount of money in the bank. Additionally, there are a number of other things that you should know. Here are facts about Secured credit cards.
Meaning of Unsecured Credit Cards
Unsecured credit cards are basically the normal credit cards used by people on a day to day basis. Customers you don’t have to pay a fixed deposit to the bank in order to get the credit card. These are mostly people who have a good credit history. Therefore, the bank trusts them easily and give a credit card without any security deposit.
How much is the deposit for a secured credit card?
The amount of security deposit for a secured credit card depends upon a number of factors that the banks see. It can range between $100 – $5000. Mostly, the deposit amount is equivalent to the credit limit of the credit card. This is generally in the case of students who have no credit history and are at high risk of defaulting. However, others with little or credit score have to deposit a relatively low amount. With time we deposit amount is reduced as for the bill payment history of the customer.
Who should use secured credit cards?
Secured credit cards should be used only by those people who do not have a good credit history. Moreover, college students who are willing to make a Credit history in the market can opt for such credit cards. Even those people who have a poor history of credit can go for this and make regular bill payments to regain their credit score.
How can they help you to make credit history?
This kind of credit card am very efficient and green building or completely developing your credit score. Regular bill payments will give you and your credit score a boost. The only thing is that you should never delay the payment of such credit cards bill or else your credit history will become negative and in future, you have to use this kind of deposited credit cards only. Hence, secured credit cards will help you to make a good and healthy credit score. However, there are some other factors also which is included in the credit score.