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Have A Question About Credit Cards?
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What are secured credit cards?
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Secured Credit Cards are perhaps the best type of cards for those with no credit or poor credit
If you have bad credit or need to establish a credit history, secured credit cards are probably the best credit cards to get because you are very likely to get approval and most report your payments to the three major credit bureaus.
Difference between secured and unsecured credit card
For a secured credit card, you have to deposit a certain amount of money (usually between $250-$15,000) with the bank issuing the secured credit card. The bank will normally extend a credit of anywhere between 50% to 100% of the deposit amount. Most banks will pay an interest on the deposit. This deposit acts as a collateral for your
secured credit card bills.
Compared to sub-prime unsecured credit cards, annual fees tend to be lower for secured credit cards. Once you have build up a good credit history, banks will start offering you unsecured credit cards.
When choosing a secured credit card, keep the following things in mind
1. make sure the secured credit cards report to the 3 main credit bureaus.
2. Make sure you get a secured credit card from a major bank as you want to be able to upgrade to a no annual fee credit card once your credit history improves.
Lastly, remember that only time and careful spending will repair your credit history.
Why are Secured Credit Cards the best cards if you have bad credit?
There are 2 reasons why secured credit cards are a much better tool than regular sub-prime unsecured credit cards.
Fees - The first reason is the fees that many bad credit card charges. Typically, you get hit with a one-time application fee which may range from $30 to $150. There is also an annual fee (about $50 on average) and on top of that, you have to pay a monthly maintenance fee (which works out to about $80 a year on average). What ends up happening is that every year, you end up paying over one hundred dollars in fees and about double that when you first apply for the card!
Credit Limits - Most sub-prime credit cards start you off with a $300 credit limit. It is actually about $100 after you've been hit with fees when you first apply. You may get occasional credit increase of about $75 (and you may be even charged a fee for that). However, most sub-prime cards never give you credit limits above $1,000.
An important part of your credit score is your credit utilization ratio (how much debt you are carrying versus how much credit lines are available). Most secured credit cards allow you to deposit up to $5,000 for one card (some even allow up to $10,000). The amount of deposit you put in is considered part of your credit limits. So if you utilize $500 and have $5,000 of available credit, that looks much better than using $200 out of $300 available credit for a typical sub-prime card.
Recommended Secured Credit Cards
Below are a couple of secured credit cards to consider.
The Orchard Bank Classic MasterCards is perhaps the best credit card in the market for those with poor credit. Orchard Bank is slightly different from other credit card companies. When you apply for their credit card, you may be offered a secured credit card or an unsecured credit card (so if your credit is better than you think, an unsecured credit card is not out of reach), with different terms and conditions, which will be disclosed to you before the application process. Their fees and rates are very reasonable compared to most other credit card issuers. This is the card you should consider first before other cards.
The Public Savings Bank Secured Card is one of the rare secured credit cards that has no annual fee (though you have to pay a one-time $79 application fee). The limit is much higher than most other secured credit card - you can deposit up to $10,000 (versus $5,000 for most secured cards) and they are FDIC insured.
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