Reasons for Choosing a Secured Credit Card

The need to apply for a secured credit card usually arises when you cannot get a conventional credit card.

A Secured Credit Card Allows You to Make Transactions Which Will Not Be Possible without Credit Cards Such As Online Travel Bookings

A  person mostly needs a credit card  for the purpose of doing certain financial transactions that cannot be otherwise managed. It is unlikely that the person can or should go through life without ever using a credit card. Not only are certain things like shopping online, making ticket reservations, making holiday bookings etc impossible without the use of a credit card, but there is also the fact that using a credit card is one of the best and simplest ways of building up a credit history.

A Secured Credit Card May Be the Only Option for a Person with No Credit History Or a Poor Credit Rating

A person needs to have a good credit history in order to qualify for loans, credit cards and even housing rentals and employment. However. Even though credit cards form basic and elementary part of individuals lives a person who is applying for a credit card for the first time and does not have any existing credit history may find it difficult to get his application approved from a creditor.

A Secured Credit Card Can Help You Rebuild Your Credit Rating and Credit History

Similarly a person who is trying to rebuild credit after damaging his credit rating you to mismanage finances will find getting approved for a credit card a difficult process. And in these circumstances is quite often recommended that such a person make use of a secured credit card. Since secured credit cards are easier to get and conventional credit cards, a person can get the advantages of conventional credit card by choosing to use a secured credit card instead. The following are some simple facts about secured credit cards that person must keep in mind.

Which Credit card Is Right for Your Teenage Child

When you have to choose the first card for your teenager was below 18 years of age you will have many options. All of these options have their own and disadvantages and disadvantages. Here is a short list of the pros and cons of different kinds of plastic that you can get your teenager.
Debit card
the obvious advantage of a debit card is that there is no credit involved. Your youngster can only use up the money that is already available in checking or savings account which will prevent him from getting himself under debt. It is also easy to set up and more readily provided by the bank if your teenager already has an account. The disadvantage of a debit card is that there is still a risk of over drafting the account and incurring the fees. However, the biggest drawback will be that a debit card does not build up the credit history as it does not work on credit and is not reported to the credit bureaus.

Prepaid or Stored Value Cards For teenagers

the advantage of prepaid or stored value cards is that the spending is limited to the amount of money that is preloaded on the card. He’s can of cards provide various services to the parents such as online checking of balances and spending. Authorised adults can load funds whereas some cards also allow employers to directly deposits the fund on the card. These kind of cards are versatile and can be used in many places for point of sale transactions. They also provide the parents would a lot of control features such as blocking transactions in certain places etc.
The disadvantage to ease can of cards is mainly that they are pretty expensive. A fee is charged for pretty much all kinds of transactions such as activation, loading money, monthly maintenance and ATM withdrawal. You may also find that this kind of card gets levied with an inactivity fee if not used for some time. Prepaid and stored value cards also do not contribute towards building up the credit history for the teenager.

Joint Credit Cards for your children
a joint credit card with a low credit limit take in out jointly by the parent and including the youngster’s name on it may be a good option. It works like a typical credit card and bills the credit history for the youngster. If properly managed it can be a great tool to teach your youngster credit management from an early stage. It can be used to educate the youngster in taking on on credit responsibility. The disadvantage of having a card like this is that a negative transaction can affect your credit history of both the parent and Child.

Secured Credit Card  For Your Teenage Child
a secured credit card is a typical credit card except for the fact that the credit limit is determined by a security deposit that he’s made initially into a savings account that is tied to the credit card. This security deposit is used by the creditor to recover his money in case of default by the credit card owner. Theh advantage is that they are easier to get than unsecured credit cards and also serve to build the credit history of a person. The disadvantage is that they usually have a high APR which makes carrying a balance on it expensive. However, charging only what you can afford to pay off in full at the end of the month is one of the lessons that you should teach your teens.

How to Apply for a Secured Credit Card

Things to keep in mind when applying for a secured credit card.

Reasons for Choosing a Secured Credit Card

What Is  The Cost Of a Secured Credit Card

These are usually higher than a conventional credit card. because a secured credit card can be considered to be a specialised credit card by several lenders it may be additional processing fee.

What Is the Deposit That You Need to Make For the Secured Credit Card

The deposit that you may have to make with the lender before you can get a secured credit card may depend on the information on your existing credit file.

Do You Meet the Eligibility Requirements for the Secured Credit Card

Even though you are making a secured deposit towards the credit limit of your credit card there may be other eligibility requirements in place. It is not always a slightly situation that you’ll get approved for a secured credit card.

How Is Your Deposit Used For Your Secured Credit Card Usage

A secured credit card is called secured because you are required to make security deposit before you can use the card. This means that you deposit an amount that is equal to or more than the credit limit on your card in an account beforehand. This deposit is used by the creditor to cover the money that you might spend on your credit card in case you do not pay the Bill. The difference is that while some creditor may withdraw the money from the deposit if your payment is late by 30 days others may wait for you to pay back balance of 5 to 6 months before using your security deposit to recover their money. This is

What Is the Credit Limit on Your Secured Credit Card

Some secured credit cards allow a credit limit equal and is to the security deposit whereas others will give you a credit limit between 50 to 75% of the security deposit.

What Is the Interest Rates and APR Being Charged on Your Secure Card

Secured credit cards typically have a higher annual percentage rates than a conventional credit card. In case you are planning to revolve your balance the APR on your secured credit card may be an important factor that you might need to consider.

Is Your Secured Credit Card Getting Reported to the Credit Bureaus and on Your Credit Report?

It is ideal if the secured credit card you use is reported to the credit bureau by the lender. This will help you build a positive credit history and even qualify for a conventional credit card after having used a secured credit card and building up a good credit rating for yourself. A conventional credit card is more sought after than a secured credit card it was it typically offers a lower rate of interest and has fewer restrictions in terms of credit limit as compared to a secured credit card. There are also other features such as cash back or rewards etc that are available on a conventional credit card and not on a secured one.

Six Major Different Types of Credit Cards

While all credit cards work on the same principle of allowing the consumer to spend on credit and billing him monthly, there are various features and credentials to a credit card that distinguish between different kinds. Different individual financial needs may be suited to different kinds of credit cards. Some of the common factors that differentiate credit cards are difference in interest-rate, reward points, credit limit, bonus features and finance charges. Listed below are some of the common different kinds of credit cards.

· Standard Credit Card – A standard credit card is typically the commonest kind of credit card that allows you to spend money on credit every month and being built for the expenditure at the end of the billing cycle. A standard credit card gives you the option to pay the balance in full on the due date or revolving the balance to the next month by making at least the minimum payment. These kinds of credit cards charged a certain amount of interest whenever you carry forward the balance to the next month.

· Premium Credit Cards – Premium credit cards are one step about a standard credit card in the sense that in addition to being like a standard credit card they offer the consumer various other bonus features like cash back, reward points, discounts etc. the premium credit cards are commonly Gold, Platinum Titanium category. Some premium credit cards also offer facilities like cash advances and payment in installments at a very low rate of interest.

· Charge Cards – Charge cards usually have no credit limit. The consumer is expected to play the balance in full at the end of the billing cycle every month. There are no Finance charges or minimum payment associated with a charge card as the payment is expected to be paid in full. Late payments can however result in the late fee, charge restrictions or card cancellation depending upon the policy of the card provider.

· Prepaid Credit Cards – Prepaid credit cards work in a similar fashion to the gift cards where you first load the amount of money on to the credit card before you can use it. Prepaid credit card is not a credit card in the technical sense. It is more like a savings account with first need to deposit the money before you can spend it. Getting a prepaid card usually involves a processing fee as well as a monthly transaction fee. In addition you may also be charged a fee for transactions such as speaking to a customer care representative, withdrawing money from an ATM, checking the car balance etc. once the balance on the card is overdue will once again need to be charged the card with more money.

· Secured Credit Card – A secured credit card is where you make a deposit as security against your credit card. Secured credit card works just like a normal credit card except for the fact that the deposit you have made can be used by the creditor to recover the payment on the credit card in case you default. The amount of deposit can be as much of double the amount of the credit limit on the credit card.

· Business Credit Cards – Business credit cards are cards issued for a business as an entity and not the individual. They are usually very high limit cards and involve and annual. Some will even charge a transaction fee. Business credit cards help in keeping the individual and the business entity separate in their transactions and therefore further help in maintaining individual credit reports for the business and the individual.

The Different Credit Card Fees That Can Be Levied on Your Credit Card

There are various fees that are commonly associated with credit cards. It is better if you understand some of the common ones beforehand.

Annual Fee – This kind of a fee is usually associated with secured and prepaid credit cards. It is a fixed fee that a credit card provider charges once a year simply for the convenience of being provided with a credit card. They range from $10 – $300 /year. You can avoid this fee by choosing a standard credit card without an annual fee or by asking the creditor to waiver the fee.

Application fee – This kind of a fee is levied every time you make an application for a credit card. This we can range from $5-$50 and is charged for by the credit card provider for going through the process of evaluating your application for approval. You can avoid the application fee by either asking the credit card provider to waiver it or by choosing a credit card that does not charge application and processing fees.

Cash Advance and Installment Interest – Cash advances and the facility of breaking a large payment into monthly installments are usually charged with a certain amount of interest every month for the convenience that these features provide. The interest-rate can range from one to 3% a month. You can avoid it by not using these features on a credit card or using a credit card that does not charge interest for them, although you are unlikely to find one. The only time that a credit card will not charge some rate of interest or cash advance or installment payment is when there is a promotional offer active on the card.

Balance Transfer Fee – A balance transfer fee applies when you transfer the balance from one credit card to another to avail a lower rate of interest. This fee is typically around one to 3% of the total balance transferred. You can avoid this fee by choosing a specialized balance transfer credit card that does not charge a balance transfer fee.

Finance Charges – These are the commonest kind of charges which are found on pretty much every single credit card. This is the main method by which credit card providers make their income. Finance charges is the sum total of the interest-rate applicable on the credit card balance plus other charges that the credit card provider levies according to the terms and conditions. These charges are brought about when the consumer carries forward a balance from one month to another in an effort to pay off the balance on the credit card by making minimum or slightly more than minimum pavement every month. The amount of Finance charges will depend on the applicable rate of interest which is determined by the credit card provider. The only way to avoid a Finance charge on a credit card is to pay the balance in full at the end of every month.

Late Fee – Late fee is charged when you have delayed the payment of your credit card bill beyond the due date. If you are late by a few days than you will be charged a certain amount of late fee in your next billing cycle. The amount of late fee depends upon the terms and conditions agreed upon by you with the creditor. You can also be charged a late fee for making less than the minimum payment on your credit card bill. The way to avoid a late fee is to make your credit card payment on time or to negotiate with the creditor beforehand if you foresee a problem in making timely payment in a particular month. Your credit card provider may agree to extend your due date and forego the late fee.

Over the Limit Fee – This fee is levied on to the consumer when the consumer spends beyond the credit limit of a credit card. Once the consumer crosses the credit limit the over the limit fee will continued to be charged every month till the time that the consumer brings it back under the limit.

What Are the Advantages and Disadvantages of Secured Credit Cards

A secure the credit card is usually considered by a person who is having problems getting a regular credit card. While a regular credit card is preferred to a secure credit card, getting one maybe a problem to someone who has no credit history. In such a circumstance getting a secure credit card may be the only option to get your foot in the credit building process.

A secure credit card is different from regular credit card in the sense that you are required to make a security deposit for the credit card. If you are getting a credit card with a credit limit of $500 and you will be required to make a deposit of $500 or even double that amount of money into an account that is linked to the credit card. In case there are any problems with repayment of the balance on the credit card in the future the credit card issuer can reach into the account take that money as payment. Apart from the safety deposit you can use a secure credit card pretty much as any other card by making purchases and paying the bill on time.

Advantages of a Secured Credit Card

· It can be used to build a credit history. Unlike a prepaid credit card secured credit cards are not be reported to credit bureau just like any other regular credit card.

· They are easier to get than a regular credit card. Because you’re making a security deposit for the money that you are likely to spend on the credit card you are offering the lender guaranty and security against default because of which they are more liable to approve your credit application.

· Even in the case of default the lender can use the money in your security deposit to recover the money you go on the credit card balance. You will not have to worry about the balance being sent to a debt collection agency.

· Even if you default on the credit card payment negative information will not be reported to the credit bureaus as the lender will simply reach into the security deposit in order to recover the payment.

· Sometimes you can even on money on the security deposit as a certain service providers place the deposit into an interest bearing savings account.

Disadvantages of a Secured Credit Card

· Coming up with the deposit for a secured credit card in the difficult. While certain secured credit cards require you to make a deposit that is equal to the credit limit, some may require you to make a deposit that is double the amount. So coming up with $500 or $1000 may be a tough choice to make.

· There will be extra fees required in order to process the application for a secured credit card. Having to pay application fee, processing fee and annual fee to have a secured credit card might make it a slightly expensive proposition.

· The interest rate on a secured credit card are usually not as competitive as a regular one. The reason for this is quite simply that a secured credit card is usually taken on by a person that has a problem with their credit information. They are either lack credit history or are trying to rebuild one. In either case the lender deems it a high risk proposition to give a secured credit card and spite of the security deposit.