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If you are having trouble managing your cash flows, and need access cash or temporary financing, but have bad credit, then accessing bank secured credit cards are an excellent option for you to improve your credit history and get back on track. A few salient features of such financing are as follows:
The Concept of Bank Secured Credit Cards
Unlike normal credit cards, bank secured credit cards require you to deposit a certain amount of money with the financial institution that is providing the secured credit card to you. This amount is equivalent to the credit line that you will receive on your credit card. You can think of a secured credit card as a pre-paid credit card that has a revolving credit line. Keep in mind that the credit card payments still need to be made by you and will not be taken from the deposit that you put down. The deposit secures the lending institution against a possible default on payments by the borrower.
Credit Line Availability & Returns on Deposit
Most financial institutions offering secured credit cards offer credit lines ranging from a few hundred dollars to many thousands of dollars. The security deposit of the equivalent amount will need to be deposited by you at the bank.
Most financial institutions extending this service will give a nominal interest rate on the security deposit that they hold for you. The deposit is typically placed in safe investments vehicles that are FDIC insured for up to $250,000, so your investment is safe.
Access to Secured Credit Even With Bad Credit History
Bank secured credit cards are available to individuals with bad credit histories and are often prescribed as an excellent way to improve your credit history. The financial institution extending the secured credit card reports positive feedback on your credit history to major credit bureaus. The reporting helps establish your credit by providing timely records.
Release of Security Deposit
You security deposit can be released in a matter of a few months if you continue to make your payments and keep your secured credit card account in good standing. Your credit score should improved considerably over time, allowing your lending institution to release the deposit.
Forfeiture of your Deposit
Under ordinary circumstances, the financial institution will not forfeit your deposit as long as you keep up with your payment obligations and do not default on your minimum payments. However, in the event that you do not make required payments even after appropriate notices, the lending agency can apply your security deposit towards your outstanding debt. For example, if you provided the lender with $300.00, that would be your credit limit. If, however, you did not make your monthly payment of $50.00, the money could be taken from your deposit, leaving you with a $250.00 balance.
Bank Secured Credit -- Leverage Limits for the Future
