Have you come to find that you don’t qualify for a traditional credit card? There are many reasons why this could happen, such as a lack of credit history or a poor credit score.
As disappointed as you may be, there’s something you need to know: you can still get approved for a secured credit card.
While these work in a similar manner as a traditional credit card, the big difference is that you must first make a cash deposit with the issuer. This acts as collateral, giving the issuer peace of mind.
If this piques your interest, here are several top benefits of using a secured credit card:
- Most secured credit card activity is reported to the three major credit bureaus. Subsequently, making timely payments will help improve your credit score.
- Your security deposit comes to the rescue if you default on your payment. So, unless the defaulted amount is higher than the security deposit, your account won’t be sent to collections.
- Depending on the offer, you may be able to earn interest on your deposit. It won’t be much money, but it’s better than nothing at all.
What’s the Credit Limit?
Generally speaking, the credit limit is equal to your deposit. So, if you make a $1,000 deposit, your limit will also be $1,000.
If you find that you need more credit in the future, you can do one of two things:
- Increase your security deposit
- Ditch your secured credit card for an unsecured credit card (if you qualify at that time)
Final Thoughts
A secured credit card may not be exactly what you want, but it’s something you can use to your advantage.
Not only does it work in the same manner as a traditional credit card, but you can use it to improve your score. Once this happens, you can explore other options that make more sense.
