Before anyone starts thinking about whether they need to carry a secured card or not, they should first know what these credit cards are and why they are important.
First of all, using a secured credit card is perhaps one of the best ways to build your credit. This is especially useful for those with no credit or low credit. Also, for those who are just looking for a useful way to build a better credit score to look nice on their credit profile.
In truth, using a secured credit card is an excellent way to get access to plastic and boost your credit capabilities, as well as rebuild your credit. These cards are quite common and most people use them for the aforementioned reasons.
Most Americans never switch their credit cards and carry them mainly to build their credit. With that in mind, we’re going further into details as to why you should give serious thought to carrying a secured credit card.
What do you need to know about secured cards?
A secured credit card is a safe way of building credit for all those with low no credit or bad credit. This is the main reason why so many people, especially younger people, use these cards.
To apply for a secured card all a person needs to do is put down an initial deposit. For those with poor credit, this might be a way out of their financial struggles.
On the other hand, those with low credit have a good and lucrative way to build their credit. A secured card also allows users to rebuild credit. Or, it allows building better credit by making payments on time after each purchase. In fact, timely debt payments allow users to improve their credit score by making on-time payments.
With no missed or late payments, secured credit card users have much better chances of building a stronger credit score that will look good in their credit score profile.
The deposit you put down is nothing more than collateral in case you don’t pay your dues, and it’s usually equal to your credit limit on the card. Before we move on with the best reasons to carry a secured credit card, here are some interesting things to know about this type of card.
8 interesting things about secured card offers
- A secured credit card requires you to be approved and it comes with a sensible deposit minimum and low fees.
- All secured credit cards have a solid customer service and support.
- To use your card, you need to link it to your bank account.
- Most card providers don’t require you to pay the entire amount. Therefore, regular installment payments will do just fine when it comes to your security deposit obligation.
- Secured credit cards have a slightly higher interest rate than normal credit cards. Because due to low credit people being considered a higher credit risk.
- Make sure you pay your monthly dues on time to avoid interests, fees, and penalties. Make smaller purchases, in the beginning, to avoid carrying a card balance, as this will look good on your credit report.
- Find out every detail about the fees before you decide which card you want.
- On-time payments give you a chance to increase your credit limit.
Now that you’ve got a proper introduction to a secured credit card, let’s review the 13 reasons why you should carry one.
Reason 1: Secured card is for people with very bad credit
We already mentioned how a secured credit card can help you rebuild your poor credit or give you credit if you don’t have one.
By putting down a deposit which is a quite reasonable and affordable deposit minimum in accordance with your budget, you get an opportunity to enjoy all the benefits that plastic can give you.
The only condition card providers have is that you pay your dues on time and they even reward you for doing so by giving you a chance to increase your credit limit and avoid costly fees and penalties. In addition to all that, being a secured card holder looks good in your credit report.
Reason 2: Ideal for emergency purchases
Since secured credit cards are an excellent way to ensure some extra financial security, they are simply ideal for emergency purchases.
The world we live in today is credit-dominated without any doubt. Those with poor or no credit at all will find themselves in situations where they will be much better off with a credit card in their pockets.
Well, a secured credit card might just be the best option in those situations. They give you just enough credit limit to get by in those difficult situations and this kind of additional financial stability can mean a lot when you really need it.
Everyone needs some kind of financial stability in their lives and in the case of an emergency, when you need to act quickly, a secured credit card might just be your best option.
Reason 3: Secured credit card deposits and reservations
Depending on your financial needs and spending habits, you can set your own security deposit and get an equal amount of credit for it. There are different maximum credit limits so it all depends on your budget really. The deposit you put down serves as collateral in case that you can’t pay your debt.
Depending on your deposit maximum, you’ll be allowed to choose your credit limit in accordance with the card provider policy. The card provider holds your deposit money as security.
To get a higher credit limit, all you have to do is pay your dues on time and help your credit scores rise.
Reason 4: Potentially improves your credit score
If you pay all your dues and monthly bills on time, you can significantly improve your credit score. Your spending habits and credit behavior is monitored by the 3 major credit reporting agencies.
If you fulfill all your obligations and don’t spend more than you can repay, better yet, if you pay your monthly bill in full, you’re avoiding the two things that credit reporting agencies don’t like: carrying a card balance and paying for large interest rates.
For those who pay their bills regularly, there are additional benefits and useful programs. These programs allow them to upgrade to better card accounts, increase their credit limits, improve credit scores and much more.
Reason 5: Transferring to a regular credit card over time
The option to transfer to a regular credit card depends on your current creditworthiness, financial needs, and spending habits. The card providers might offer you a program to upgrade to a regular card account over time. To apply for such a program, you need to pay your dues regularly and on time.
The more you keep your credit card in good standing, the more you’ll be eligible for making the transfer. All positive activity will be reported and this will help your credit scores rise.
Reason 6: You may earn money on deposits
If you keep your secured credit card in good standing all the time, there’s a program that allows you to refund your security deposit. Most card providers allow for this and it’s possible to continue to use the card even after the deposit has been refunded.
Prove that you can be a responsible credit user by regularly fulfilling your monthly obligations. Then, quite possible you will enjoy additional benefits like getting a higher credit line and so on. So, you can get your deposit back along with a higher credit limit if you follow the rules.
Reason 7: Secured card earns rewards
It’s quite rare to find secured credit cards with a rewards program but they do exist. These cards allow you to either earn your cash back or earn some extra points that you can use with each next purchase you make. Usually, these cards come with low interests and no annual fees, so this might be a really good way to boost your credit scores.
Reason 8: A cap on your spending
Using a secured credit card isn’t about spending more than you can afford. It’s about acquiring better spending habits to improve the quality of your life. You need to know your limits, spend reasonably, and be responsible for your financial and spending behavior.
A secured credit card ensures additional financial security but if you don’t behave yourself, it can become a real nuisance. Those who don’t pay their dues on time have to pay for costly fees, interests, and penalties. This doesn’t look good on your credit score reports.
Set a sensible credit limit, think strategically about when to use your card. Focus only on what really matters to you. Remember, you use a secured credit card as a way to rebuild your credit, not to fall into a financial trap with no way out.
Reason 9: Security deposit gives you one-time leeway
Your deposit is your credit line. It’s all very simple. We mentioned before, that some card providers offer the possibility of returning your deposit as a reward for your responsible and positive behavior.
This is an excellent way to get a one-time leeway. You not only get your money back. You also get a chance to continue to use your credit card with an improved credit score report and everybody wins.
Reason 10: Secured cards reports to all 3 credit bureaus
Your spending habits and credit behavior will be under constant watch. The three major credit reporting agencies will be monitoring you. Your monthly payment history plays a huge role in your creditworthiness.
Keep your card in good standing, maintain positive activity, pay your monthly dues in full and watch your credit score move upward. You’ll also become eligible for numerous rewards and additional benefits for doing so.
Reason 11: Secured credit cards are internationally accepted
Just like all other regular and traditional credit cards, secured credit cards are internationally accepted. Over 30 million merchants, vendors and so on receive and accept these cards. You can use them wherever you go, which is one of the reasons why so many people use them.
Reason 12: Grace period
Most card providers offer the grace period, usually lasting between 6-12 months from the moment you apply. It means that you’re allowed to pay your monthly dues without having to pay any additional fees or interest.
Most of the time, this grace period applies only to new purchases but still, this is a good way to earn some cash back while buying stuff you need on a daily basis.
Reason 13: Secured card limit flexibility
Perhaps one of the best reasons why you should consider carrying a secured credit card is limit flexibility. To reward you for your positive activity and responsible spending behavior, some card providers will allow for additional benefits such as increasing your credit limit.
If you regularly pay on time, you can increase your limit and get your deposit back. You even can make a transition from a secured credit card to a regular credit card. It takes a sustained period of constant on-time card payments but eventually, it’s possible to start small and end up big.
Positive activity is sometimes rewarded without requiring you to do anything. Your card provider will surprise you in the most pleasant way.