subject: How Will My Credit Score Increase If I Get a Secured Credit Card? [print this page] How Will My Credit Score Increase If I Get a Secured Credit Card?
The size of the deposit will determine how much money the card holder will be allowed to spend. For example, if a consumer places a $300 deposit when opening their account, the credit limit of the card will be anywhere from 90 to 150% of the deposit. If a consumer then decides that they would like a higher credit limit, he or she will be able to make an additional deposit and raise the amount of money in the account. Additionally, when a consumer continues to make credit card payments and use their card responsibly, he or she may be rewarded by enjoying a higher credit limit offered by their issuing bank.
Consumers that have a bad credit score will find it difficult, if not impossible, to obtain any new credit cards or loans of any kind. In the case that they do need to open a credit card or obtain a loan, they will generally suffer from high fees, high interest rates, and overall expensive credit. Fortunately, obtaining a secured credit card is a great way of improving one's credit, while providing a source of extra cash in case of an emergency.
Because consumers are required to make a deposit on a secured card, there is very little risk to the issuing bank. However, not only is there little risk, but consumers will be required to pay certain fees, including application and annual fees, which procure a profit for the issuing financial institution. This allows them to offer secured credit cards to consumers with bad credit, without a very large chance of the consumer not paying their bill.
Secured cards help a consumer's credit in a few different ways. Simply having an active, revolving debt will help raise a card holder's credit score. Additionally, continuing to pay the card bill each month will show financial responsibility and improve one's credit. However, for the most effective credit boost, card holders should be sure to keep their balance low and pay all bills on time, as this will also be taken into consideration when evaluating credit.
Unfortunately, consumers must be sure to carefully choose a secured card. Some cards will require card holders to pay very high fees or purchase expensive insurance, which will make make their financial situation worse, instead of better. When selecting a prepaid card and improving credit, it is important to carefully examine all aspects of the card, in order to choose a financially beneficial option.
Michael writes on credit cards and related topics, and you can read more about prepaid credit cards at his site
