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Best Secured Credit Card

Bad Credit Rating? Get The Best Secured Credit Card You Can

Getting the best secured credit card is worth considering if you have a poor credit rating and want to improve and repair your credit score. It's almost impossible to obtain an instant approval, unsecured credit card when you have a flawed credit rating. And if you are a student or young person starting out without a credit history, you will also experience a difficult time getting approved for a credit card.

It's a fact that most card companies hesitate before taking a chance on anyone who doesn't possess an unblemished credit history.

How Do Secured Credit Cards Work?

Secured cards look and work very much like unsecured credit cards and offer similar charging privileges and security. With a credit card that's "secured," however, the card company demands a security deposit equal to your line of credit, and sometimes more. This guarantees that the company will never lose their money if you become a bad credit risk.

A bank secured credit card operates much like a "bank debit card"; however, the cash is not withdrawn from the account immediately, and the cardholder must make payments each month.

It's also like a "pre-paid credit card," as cash must be available upfront to cover the line of credit. However, with pre-paid credit cards, you can "load" the card with any amount of money you want, and you are charged a fee whenever you input funds.

Some lending companies may allow you to have a limit that is slightly higher than your security deposit, but it all depends on your credit worthiness and history. Other companies might set the limit slightly less than your deposit.

When searching for the best secured credit card, it pays to shop around to discover what options are available so you can choose the best credit card for your circumstance.

Who Should Use Secured Cards?

Applying for the best secured credit card could be to your advantage in any of the following circumstances:

If you have nonexistent or poor credit history

If you have outstanding debts or unpaid student loans

If either you or your spouse has a high debt ratio

If you recently declared personal bankruptcy

If you are unemployed or experiencing a job layoff

If you recently began a new job or started a career

If you are starting a home business

Advantages To Consider

The best secured credit card can benefit you in the following ways:

It can help you to establish a credit history

It can help you to rebuild your credit after bankruptcy or bad credit

It can offer you secure funding when traveling or during emergencies

It can provide you with similar benefits to unsecured credit cards

Disadvantages To Consider

Even the best secured credit card comes with some disadvantages:

You are required to make a substantial security deposit that is often equal to or slightly above your card's credit limit

Your security deposit remains frozen during the life of your card or until your credit history is restored to health

You might not receive any interest on your deposit, as it might be considered part of the cost

You will pay a higher APR (Annual Percentage Rate) than you would with most unsecured credit cards

How To Use Secured Credit Cards

Even the best secured credit card offers NO cost advantages to the cardholder. That should come as no surprise. Applicants are considered "high risk" so you must pay a higher APR. The increased interest costs make it harder for you to make your monthly payments, which likely contributed to bad credit in the first place.

To get around this impasse, secured cardholders should be careful about making too many purchases the first year. Monitor your spending and don't use your credit card unnecessarily. Charged amounts should be kept low, and you should make every effort to pay off "almost all" the card balance each month when payment is due.

Why "almost all"?

Because the financial experts say the most effective way to repair bad credit and build a good credit history is to...

1. Always make your monthly payments on time.

2. Always pay "some" interest each month.

By doing this, you will quickly improve your credit score and create a favorable credit history. If you can get the best secured credit card for your circumstance, use it wisely and you will soon be on the road to a good credit rating. Then, you will qualify for a less-restrictive and less-costly unsecured credit card.

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