A secured credit card is a type of card that utilizes the money that you placed in your security deposit account as collateral. Your credit line will be based on a number of things. These things include your ability to pay, your income and the amount of cash in the account. A secured deposit assures the lenders that you are going to pay back. For example, if you have $5000 in your deposit account, you credit line will be $5000.
Facts about secured credit cards
1. They help to reestablish or build credit
This type of card can help you re-establish or build your credit. However, you should keep in mind the fact that if you default your payment, the issuer of the card will keep your deposit. This means that paying on time is just as crucial as it when you are using the traditional credit cards.
2. You can use them to do the things that you did with a traditional credit card
Secured credit cards are just like the traditional credit cards. You can use it to make the purchase that you need on a daily basis. You can also use it to perform transactions that do not allow the use of debit cards or cash payment are not allowed.
3. Secured cards are usually reviewed periodically
Your secured card will be reviewed periodically. If your review is successful, you can qualify to use an unsecured credit card. You can also receive a refund of the money that you deposited as collateral. If you manage to maintain a responsible credit behavior for a long time, you can get a mortgage, car loans and other loans at lower interest rates.
Most people use secured credit cards to build or re-establish their credit. Using this credit card is one the best ways to demonstrated to the issuer of your card and credit reporting agencies that you are a responsible person who uses credit wisely.