There are many people who get a secured credit card every year. People use credit cards to establish a credit history or use it to get their credit back to a higher score. This type of credit card usually just needs someone to already have a checking or savings account already set up. The secured credit card will function the same as a normal credit card; the only difference is that it’s backed by a checking account instead. This way, if and when someone is unable to pay their bill on time, the funds are thus taken directly from their checking account. The bank therefore is able to get the money they are owed, while still allowing the person to have the benefits of the credit card.
Secured Credit Cards for Those with Bad Credit
For those with bad credit, then a secured credit card is an excellent way to show it’s possible to pay bills on time, and continuously. As the person continues making payments on their card, the credit rating will therefore improve. Before long, that person will be able to apply for an unsecured card. A benefit for a secured credit card is the person cannot go into debt because they are only able to spend the amount of money actually in their account. However, it is still advised to use the card as responsibly.
Application Process
When beginning the process to apply for secured credit cards, there are a few things to be considered.
- The first thing is the annual percentage rate. The best option is to choose one that has a low-interest rate. The higher the interest rate is, the more cardholders will pay in the long term.
- Also, any fees attached to the card should be considered too. Sometimes, there is a fee charged to the card for multiple reasons. So therefore, it is important to search for cards that either have no fees or that have lower fees.
Best Secured Credit Cards
One of the best secured credit cards is from Wells Fargo. They are known as one of the most successful banks known around the world. They offer cardholders a 25-day grace period before any interest charges start to accrue. Their annual fee for their credit cards is one of the lowest of all banks, at only $25. Another great option for secured credit cards is the Capital One secured card, whose fees vary but ultimately are very reasonable. Open Sky is another option for secured credit cards – they have higher fees but is still a great option for those looking for this type of card.
There are a lot of different secured credit cards to choose from. If someone doesn’t have any credit history or their credit history is not the best, it’s no reason to panic. Credit is something that’s meant to be worked on and fixed. Most people can see a significant improvement in their credit score in just a matter of a few months.
Depending on how bad the credit score is, it could take a bit longer to repair credit, but still not as long as some people may think. It’s important for someone to find right card for their own needs. They need to understand that if they use the card correctly and do the most to repair their credit, they will not need to have the secured credit card forever.