When someone has a bad credit score it is usually difficult to improve their credit history without using credit cards. In some cases, credit cards are the solution despite being the source of the trouble. However, what many people are concerned about is interest rates on unsecured credit cards when someone’s credit score goes from good to bad.
A bad credit score can increase rates on a credit card and make it almost unmanageable for anyone who is at a point where they want to be rid of a bad credit score. Again, improving a bad credit score often takes improving one’s credit history, which can be done by making smart purchases on credit and promptly paying them off.
Secured credit cards are often used when someone is in this situation. A secured credit card is typically what many people refer to as a bad credit credit card and a secured credit card can be a valuable tool in helping anyone improve their credit score.
A secured credit card works just like a regular credit card, only the cardholder must deposit money into a bank account so that the card will be secured in case the cardholder decides not to or cannot pay off their charges. This is where many people worry or even get confused when it comes to a secured credit card.
The reason that this account is required, other than to secured the credit card, is because anyone with bad credit is seen as a risk, which is why interest rates increase on their cards, and since secured credit cards often have reasonable interest rates, banks need something to prevent them from loss when giving a card to someone who may be a financial risk.
However, anyone who responsibly uses their secured credit card and doesn’t treat it like a debit card, meaning they think of the funds in the secured bank account as money that will pay their charges, they can easily use this type of card to improve their credit score.
The money deposited into the secured credit card account will not be used to pay off credit purchases unless the cardholder defaults on their charges; it’s up to the cardholder to make responsible purchases, save money, budget and sacrifice, so that they can use their secured credit card to make purchases and quickly pay them off so that it reflects well on their credit history.
While a secured credit card isn’t a guarantee to fix one’s credit score, anybody who uses a secured credit card wisely is going to find that it is a helpful tool in improving one’s credit history and credit score.