Occasionally, your personal situation can damage your credit rating. In the United States, countless families have suffered from the recent financial recession in more ways than one. Lots of employees have found themselves unemployed very suddenly. Even people who were in quite high management positions in companies, were not exempt from being laid off from their jobs.
If credit is something you have never had, or you want to improve your rating, it may be good idea to discover secured credit card. These are simpler to be approved for, compared to normal unsecured cards. The collateral that backs these cards means that banks are not taking so much of a risk; thus your chance of approval is increased.
A secured credit card is different from a prepaid credit card. Prepaid cards are cards which are injected with cash, and then carried and utilized like standard credit cards until the cash runs out. Once this occurs, the card requires recharging, similar to a battery. The big name brands, like Mastercard and Visa, issue such cards, and it is impossible to distinguish prepaid cards from normal credit cards, unless you have a trained eye. The biggest issue with a prepaid credit card is that their usage and payment do not get reported to credit agencies.
For those with a “black hole” frame of mind who are purchasing online, this is fine. However, for people who want to restore their credit, a better solution has to be found. If you discover secured credit card, cash gets deposited into your savings account and the credit is taken out against this deposit. The use of the card is secured against the amount of the deposit.
Usually, the buying limit will either be the deposit amount, or a little bit more than that. Depending on the card type, the card might either be completely secured (an advance of a dollar for a dollar against the deposit), or a card that involves some kind of leverage (where you deposit a certain amount with the bank agreeing to give you a related amount of credit on the card). Should you default or cease making payment, your bank can seize your deposit money to settle the card balance. Be aware that the issuer of the card will only withdraw the cash against the safety balance if you default. Also, you have no access to the security deposit whilst your card is in use.
Secured cards have a different type of interest rate and term. The rate of interest can vary from 0%-23.99%. Invariably, the lower the rate of interest, the bigger the annual charge. Furthermore, the issuer of the secured card might also charge a fee for usage or maintenance. Usually, the majority of card issuers charge about 17% for card usage. To compensate for this, many issuers provide interest (close to the market rate) on your safety deposit.
If you discover secured credit card, you will be able to rebuild your credit rating if you have encountered problems in the past, and are experiencing difficulties in finding a financial institution who will lend you money. It is vital that the scheme you select will inform all three major agencies. If this does not happen, then this will not assist you in reestablishing your credit worthiness in the eyes of a lender. A few institutions will permit you to change your account to unsecured, following a period of responsible management and consistent payments.
Generally, the deposit amount depends on the bank requirements. Thus, it is sensible to shop around before you discover secured credit card. Normally, the amount starts somewhere in the region of $200.00 to $500.00, and it can go upwards from there. Also, bear in mind that further fees might be applicable on top of the security deposit. This could be to settle maintenance fees or annual fees.
As mentioned above, when you discover secured credit card, the collateral will only be used if you miss payment. You should find out at what point your bank will take it. Some banks will take the cash immediately upon a payment being missed, whereas others will only take it if you are seriously delinquent.
There are lots of scams which you ought to know about when you are looking to discover secured credit card. It is sensible to be cautious of any offer that seems too perfect. You will still have to have a credit check. Furthermore, be cautious of calling any 900 numbers. Such numbers are expensive to call, and you are not guaranteed to gain approval once you have made the call. Moreover, be very wary because some cards that get issued are not actually issued by real financial institutions, so any offers you get from such companies are likely to be a scam. Should you encounter any offers that you think are a scam, you should complain to the FTC (Federal Trade Commission) via their website.
A genuine MasterCard or Visa card will be provided from a member bank of the FDIC, or from a credit union. Due to this, you can be assured that your cash is safe and guaranteed by the government. Certainly, the safety of your cash is questionable in the present economic environment, but it is unlikely that you will need to worry about this too much over the following few years. When you discover secured credit card, it is quite a small investment – all things considered.
You should do your homework before you discover secured credit card. Request up front if you will have to pay any processing or application charges, and if this will be refunded if you do not get approved. Read through the conditions and terms carefully to ensure that you are completely aware of any charges you will be liable for with the account. Lastly, understand that receiving a card, even if there is sufficient cash for a deposit, will not happen automatically. Every bank uses different restrictions and terms. Always take your time and read the small print.
