Is A Secured Credit Card Right For You?
Secured credit cards look like regular cards, but they aren’t technically the same. Because credit is essentially a loan extended to you by the card issuer, requiring you to pay it back on time, these cards aren’t really proper credit cards.
If you pay off your conventional credit card withing a billing cycle, you won’t have to pay any interest. However, you might still have to pay annual fees. The benefit of credit cards is that they allow you to buy things immediately, even ones you wouldn’t necessarily be able to buy without saving up several paychecks.
Saving money for little things is a good idea. However, if your car’s transmission fails or you decide to take a loved one on a big vacation, that could be a lot harder. Credit cards are also prestigious and incredibly convenient.
Being able to whip out the ‘plastic’ and make the transaction happen is often required to look like you’ve got your act together without carrying mass cash. This is why so many people use them every day!
However, if you’ve had some bad luck or made some purchases that were really too big to handle, you may no longer have the credit score to get a regular credit card. This is where a secured credit card comes in.
You can still get all the bonuses of a credit card without having to deal with the problems. On a secured credit card, you put up money in advance. This amount becomes your effective spending limit. That keeps you from being able to get in the same kind of trouble using a secured credit card that you can using ordinary credit.
Also, it’s a great way to rebuild less than stellar credit, provided the issuer (company) that provides the secured credit card report to the credit bureaus. While the secured card won’t let you ‘go big’ on things beyond the cash you put in… you’ll get all the convenience and prestige of having plastic, and you can fix up that credit at the same time.
If you’re thinking about using a secured credit card to improve your credit situation, be sure you use a card to report your on-time payments to the credit agencies. If you don’t do this, your score won’t improve. If you’re just looking for insurance against over spending and the convenience of a credit card, you can use any secured credit card - just make sure you find one that’s low in fees.
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