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When you apply for secured credit cards, it's a little different than applying for unsecured cards. The credit requirements are generally different, and a secured card will rely more heavily on other factors, such as employment. Here are a few things you need to know about applying for a secured credit card.
Application
Some secure card companies will ask that you open a savings account with the bank from which you want to get a secured credit card. You can open a savings bank account with a deposit ranging from $200 to $500. This serves as collateral deposit. You will enjoy a credit of a percentage over and above the amount deposited by you. The amount deposited by you is your credit line. It provides an assurance that when you use the card, your bills will be paid.
Some card companies will just attach the deposit on to the balance of the card. This lowers your original available credit, but can be a more convenient option than opening a savings account for some people.
You can apply for a secured credit card online. After the savings account is opened, the banks will approve your credit card. At this time, you may be required to furnish some documents like your income proof, your previous history with credit cards, your employment details, address verification, list of pending loans or bad credit with other banks, etc.
Once you are approved, the bank will we'll send you a credit card. You enjoy the same credit line as the amount deposited by you in your savings account. The deposit in your savings account will earn an interest at a rate applicable to a normal savings account.
A secured credit card functions like any other credit card and is accepted everywhere, as is case with other cards.
If you are regular in making your card payments, the money deposited by you in the savings account will not be touched. Your amount in the bank should be fully secured.
Deposit Interest
You make your money work for you as you earn interest on the deposits in your account.
If you make payments regularly for at least 12 months, then the bank may reward you with additional credit line, without asking you for additional deposits. The bank may also offer you another credit card, without credit line.
Each month, you will be billed for the purchases made by you. The amount is not deducted from your account directly. Make some payments each month towards your bills, otherwise you will end up paying interest on your purchases. This interest rate is much higher than the interest earned by you from the deposits.
Credit Reporting
Your bank will report your good credit habit to three major bureaus in the US who are maintaining records of credit ratings. If you have a good credit rating, its benefits are manifold.
A secured credit card will help you built your credit reputation. Once you have a good reputation, you will find it easier to apply for other loans like home loans, car loans etc.
Understand The Extras
Some banks charge for simply enquiring about your account balance. The charge could be anything from $2 to $ 50. So, before you go on to making a call, read the fine print. Also find out if a different rate is charged for purchases and cash, and what purchases constitute cash. A lot of card companies will charge a higher rate for some purchases. Things like paying a mortgage or insurance bill can actually be considered cash. You don’t want to end up paying your mortgage at a higher rate of interest as this would just end up costing you entirely too much money versus the convenience it’s worth.
How To Apply For A Secured Credit Card
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