Secured Credit Cards
If you do have problem credit, there is a way to get a legitimate credit
card and start rebuilding your credit. It’s known as a “secured
credit card.”
Like a loan on a house or car, these cards are considered “secured”
because you provide some collateral. In this case, it’s in the form
of a security deposit.
Basically, you send the credit card company a check, and the company sends
you a credit card with a limit based on the amount you deposit.
The credit limit usually is from one to three times the amount of the security
deposit—so you might provide a $99 security deposit to secure a card
with a $200 limit.
The bank usually puts the security deposit in a savings account. When choosing
a secured credit card, make sure your money will be placed into a savings
account that will earn interest.
Sometimes, after you’ve built up a good relationship with the credit
card provider, the security deposit will be returned to you, along with any
interest it earned.
Don’t rush into a secured credit card. The cards usually require application
and processing fees and come with a higher interest rates than unsecured cards.
But many issuers, including the biggest names in the industry, offer secured
cards. Comparison shopping can save you a bundle.
These cards clearly are not the best deal available, but they are a good
first step toward rebuilding your credit. Your goal should be to step up eventually
to an unsecured credit card with better terms and a higher credit limit.
Next: Conclusion |
