Cardholders who may have a bad credit score or consumers with bad credit typically turn to secured credit cards as a way to access credit which can be used to repair their bad credit history. However, consumers also tend to think that secured credit cards will come with a lower interest rate, since these cards are backed by a savings account in most cases, which both secures the credit card lender and sets the credit limit for the user.
While it is true that secured credit cards are usually more affordable, in terms of interest rates, to bad credit borrowers than unsecured cards, for instance, which are tailored for cardholders with a bad credit score, these cards do usually come with interest rates which may be higher than unsecured credit cards for borrowers in a decent credit position. While offers on interest rates for secured credit cards typically vary depending on the lender, secured credit card seekers may benefit from shopping around before choosing a card.
Numerous financial institutions may offer secured credit cards which can be used to repair a bad credit score, and for individuals who are in a position to begin building a better credit history and reestablishing a positive credit score, these cards have been greatly useful. Yet, many advisers often suggest that cardholders deal with only reputable financial institutions which may offer them a decent interest rate on a secured credit card, but also avoid cards which come with fees that may eat into a cardholder’s deposit.
Also, finding a secured credit card with a lender who will report card activity to the big three credit bureaus is vital, so that a cardholder will be able to benefit from positive credit activity which may be associated with their card. Understandably, these secured credit cards are no guarantee when it comes to rebuilding a consumer’s bad credit score, but are only available as a tool which has been used by consumers as a way to begin establishing their credit history with a card that comes with somewhat of an affordable interest rate.
Cardholders who proved to be a safe credit risk typically are offered unsecured credit cards, which may come with a higher credit limit and a lower interest rate, but this takes time as rebuilding a credit history is no easy task. Many secured credit card users often make small, affordable monthly charges which can be promptly paid off when their bill comes from month-to-month. The secured bank account which is used to protect the lender will not be used to make payments on charges, unless a cardholder defaults or begins missing payments, so proper budgeting is necessary for a secured card to help individuals attempting to rebuild their score.
While, again, secured cards are no guarantee since they are only as useful as the cardholder’s financial habits, these types of credit sources have been used by a wide range of consumers from those who have simply implemented poor credit choices and habits in their life or those who have come upon an unexpected financial difficulty which caused their credit score to drop. Yet, in both cases, proper secured credit card selection and spending habits were implemented, which led to this type of card being beneficial for its users.