A secured credit card needs cash as a deposit of security. The deposit diminishes any risk to the issuer and this makes the card a viable option for people with bad or no credit. Here’s a list of some of the benefits of a secured credit card: When you cannot get approved for a traditional credit card, you can always get approved for a secured credit card. Making payment for the security deposit takes away the credit risk from the credit card issuer. In contrast to a prepaid credit card which lets you make electronic payments, a secured credit card reports your account history to the credit bureaus so that it gets included in your credit report. A secured card makes way for a great credit cards for bad credit. As payments get included in your credit report, paying timely and managing your balance helps improve your credit score. Once you’ve built your credit score, you can qualify for a regular credit card. You get to earn interest on your deposit. Certain secured credit cards place your deposit in a savings account that is interest-bearing. You may also be able to earn a few bucks depending on the amount of time your deposit stays in your account and the interest rate. In case you default on your payment, your security deposit gets used. If your defaulted balance is higher than your deposit, you will get sent to collections for payment defaulting. Even though your card issuer will keep your deposit, you are not required to worry about debt collectors harassing you for missed payments on the card.
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