Understanding Secured Credit Cards

The use of credit cards is no doubt widespread through Canada and the United States. They have literally become the most preferred mode of payment because of the security they provide and convenience plus other reasons.

Unlike a regular credit card, secured credit cards are easier to obtain. You can apply and obtain one even though you may not have any credit history.

In this respect, having a secured credit card is one of the best cards when it comes to establishing your credit history and a credit score. Unlike applying for a regular credit card, applying for a secured credit card involves a deposit payment. This deposit acts as security for your credit limit. You are entitled to the deposit that you pay when the time comes to close your secured credit card account.

There are several issues you need to look into when choosing from various secured credit cards.

First, you need to understand the level of fees attached to a particular secured credit card that is of interest to you. Note that there may be an application fee, processing fee and annual fee. It is important that you compare such fees as quoted by different secured credit card issuers in order to find the right card for your needs.

In addition to applicable fees, it is also very important that you compare the minimum security deposit attached to different secured credit cards. This is important because there are some issuers that require that you pay a higher deposit than others. There are also some issuers that will pay you interest on your security deposit.

Different issuers of secured credit cards also have different credit limits, which you must take into account when shopping for a secured credit card. While there are issuers that set the credit limit equal to the deposit paid, there are others that accept a very small deposit and provide a higher credit limit.

The higher the APR rate, the more interest you will pay on outstanding balances.

Perhaps the most important factor to consider when shopping for a secured credit card is the level of annual percentage rate (APR) quoted by the issuer of the secured credit card. The APR is important since it is the level of interest rate you will be charged in case you carry a balance on your secured credit card.

You also want to confirm that the issuer will report to the three credit bureaus including Equifax, TransUnion and Experian. Such reporting can be valuable to you if you are trying to establish a credit history or out to repair a damaged credit history. Some secured credit cards can also be converted into a regular credit card when some credit history is achieved.

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