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Unsecured credit cards bad creditCredit cards are a part of our life. With 2 billion cards in circulation, one cant get away from the omnipresence of the unsecured credit card for bad credit. You need a credit card for almost anything you wish to do like making a hotel reservation, purchasing house hold items, booking an air ticket, train ticket or renting a car.
You probably get an offer in the bank every couple of weeks telling you about this great new credit card that some bank you probably have never heard of wants to give you. Everyone gets them, in fact last year alone credit card issuing companies sent out six billion credit card offers. Thats 20 for every person in America! All credit cards are not the same. There are unsecured credit cards and secured credit cards, but whats the difference Which type should you get
The term unsecured credit card is not a term that is used too often or too widely. This is because they are actually just regular plain-Jane credit cards. You make your charges, they send you a statement at the end of the month, you pay some or your entire bill, and receive finance charges for any balance which was carried over from the previous month. There are also many types of unsecured credit cards. There are student credit cards which are easier for students with no credit to get, credit cards with all different sorts of designs, credit cards with different reward programs, interest rates, types of fees, and much more. You will have to do in depth research and compare credit cards to see which credit card is best for you. If you have good credit, you definitely want to go with an unsecured credit card as opposed to a secured one.
Even if you pay cash a credit card comes in handy. There also umpteen merchant establishments, which require a credit, card to accept your check. Your credit rating can also be upgraded in case you use your credit card in a responsible manner. But there are many people who have never had an unsecured credit card for bad credit. There are others who cannot have a credit card, due to their poor credit rating. Then there are people who need to repair a poor credit history. These people do not qualify for a regular credit card. Such people whose credit rating is low can get a secured credit card. For them, a secured credit card may be the only option available to re-establish their credit.
Now, lets talk about the new kid on the block, and thats the secured credit card. These accounts are for people who have bad credit and want an opportunity to rebuild their credit. A bank issuing you a secured credit card will require you to open a savings account or deposit a sum of money as security for your line of credit. Then, the line of credit you receive is usually anywhere from 50%-100% of your security deposit.
Secured credit card is a type of credit card that is linked to a deposit account. In other words the money in the account is a security for the credit card. Its normally a saving account. Banks generally ask credit card holders to deposit between 100% and 200% of the total amount of credit desired. Thus if the cardholder needs a credit limit of $ 1000 then he will be asked by the bank or card issuer to deposit an amount of $ 1000 or $2000 in his saving account. In some cases, credit card issuers offer incentives even on secured card portfolios. In these cases, the deposit required can be as low as 10% of the desired credit limit. This deposit is credited to a special savings account.
Having got the credit card backed by a saving account the cardholders liability to pay the bills generated every month is not obviated. The cardholder of a secured credit card is expected to make regular payments, as he or she would with a regular credit card. However should the card holder default on the payment, then the card issuer has the option of recovering the outstanding or the amount due to the merchants out of the deposit. This is a normal practice and requires no special sanction.
But there is a silver lining to all this, The deposit is in the hands of the credit card issuer as security, but in case of default by the consumer, the deposit will not be credited simply for missing one or two payments. In other words minor misdemeanors like missing a payment does not lead to immediate attachment of the money in the deposit saving account. Usually the deposit is only attached when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days). Thus until the account becomes delinquent the credit card account will continue to attract interest and other charges. This could result in the actual credit limit on the card being exceeded. The total debt may than cross the original deposit. The cardholder then not only forfeits the deposit, but is saddled with an additional debt as well. Thus its important in a secured credit card not to be delinquent and pay your dues on time.
The cardholder agreement, states all these conditions explicitly.
Unsecured credit cards bad credit have a definite purpose. They are an option for a person having poor credit history or no credit history to have a credit card, which otherwise he would not be able to get. These secured cards serve a basic purpose of helping a person to rebuild his credit score and rating. Both Visa and Master issue Secured credit cards. Despite having a saving account attached to the Secured card, yet all fees and service charges will apply as in a normal credit card. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards. However, for people with a long history of delinquency the cost of a secured card can often be less expensive in total cost than unsecured credit cards, even including the security deposit.
Secured Credit Cards like unsecured cards also have many payment options. You can opt for monthly payments like automatic debt payment from a personal bank account. You are also entitled to interest-free periods. You can also pay by check or cash.
Experts agree that though the trend is towards unsecured credit cards still, secured cards are a good choice. Sometimes they are the only option, for people who are just starting out or rebuilding after a major life event, such as a divorce, job loss or serious illness. Some issuers give secured cards to people who are new to credit.
Once you open an account to secure a credit card then in case you are lucky some issuers may pay you interest - up to 4.5% - on the account. Some only pay interest if the amount is above a deposit limit. So make it a point to examine all offers before opting for a particular secured credit card.
Secured cards - issued with the MasterCard or Visa logo-look similar to unsecured cards. They also function in the same manner. To the rest of the world, they are just credit cards. Some banks may increase your credit line without you having to make additional deposits in case you are regular in your payments. Other issuers may charge a fee increasing your credit limit. Examine such offers carefully.
Secured cards can be used as a stepping-stone to a regular, unsecured credit card. Do use your card to make purchases, for just having the card but not using it does not help you build credit. Your aim should be to restore your credit and then graduate to an unsecured card. So make sure all your payments reach the company before the due date and do not cross your credit limit.
Secured credit cards can help you build your credit. But remember a missed payment or a bounced payment check will have a negative effect. So in case you are in financial trouble, remember to pay at least the minimum amount due on your credit card by the due date. In case you are regular in your payments for six months to a year then there is a good chance that you will receive offers from issuers for unsecured credit card. Before accepting any offers examine the conditions in detail. Never do anything in a hasty manner. Lastly cancel your current secured card only after you receive your new credit card.
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