As the name suggests Secured Credit Cards are cards that require submission of a security deposit before a card is issued to the borrower
. That security deposit is then used as the credit limit for your new card. The security deposit can vary from something as small as 100$ to something as big as 2000$. Getting a secured card has many benefits some of which are:
It is the perfect tool for people who never had a credit history. Having a maximum cap on the amount you can spend will keep your spending under control thereby insuring you pay all your bills at time and build a strong credit history.
For many people with a very poor credit history secured credit cards are the only option. It is the best way to reestablish your damaged credit history. Slowly after you have improved your credit history you can apply for an unsecured card.
There are some people who are just the victims of bad spending habits. For such people secured cards are a very good choice as the short credit limit will make sure that they dont overspend thus keeping their finances under control.
There are a lot of different things a person should look for in secured credit cards. Some of which are:
One of the main things to watch out for is the fees attached with the card. Make sure you buy a card with zero or low start up fees. Also make sure that the annual fee attached is also low.
One of the biggest disadvantages of using a secured card is the high interest rate customers have to bear. Make sure you dont end up with a card that has an interest rate of more than 20%. Look around and find out about all the options available.