The credit cards available to consumers who may have a poor credit score or be in an outright bad credit position are usually not available through unsecured offers, but depending on the situation, there have been some individuals who may have found exceptions to this rule. What commonly occurs in the life of a consumer who has a poor credit score is that a secured credit card is necessary to begin the process of rebuilding their credit or for simple use to meet certain needs, but as interest rates here at the end of July have seen relatively little movement for this particular type of card, there are some who question if these types of secured cards are beneficial for consumers and if so how should they be used by consumers in a less-than-perfect credit situation.
At the present time, secured credit card rates are holding at around 22% to 24%, which may be higher or lower depending on the severity of a consumer’s credit situation, the lender they choose to work with, and what a card may require in terms of collateral. However, what needs to be understood by consumers who are uneducated on secured credit cards is that no matter what rate may be received, be it higher or lower than expected, the consumer needs to be aware of the fact that secured credit cards are primarily useful when it comes to reestablishing or beginning the process of establishing a credit history in the life of the consumer.
There have been consumers who are in a poor credit position who see advertised cards which may offer lines of credit to someone who has a bad credit score and feels that this is the right card for them. If this is the case, consumers often find that these interest rates may be higher than other types of credit cards, but usually this is understandable since someone in a bad credit position may be deemed as more of a risk and, as a result, collateral will be required and a higher interest rate must be carried by the cardholder. Yet, secured credit cards are not really meant to be used for everyday purchases, particularly when it comes to carrying a balance. While some consumers may use a secured card to purchase everyday items, they are usually in a position where they have money set aside to pay off the entirety of this balance, as buying food, clothing, or other affordable purchases with a secured credit card can go towards building or improving a consumer’s credit history, but with these high interest rates carrying a balance could lead to problems.
Some cardholders and officials would argue that it really doesn’t matter what purchases are made with a secured credit card, as long as they are affordable and paid off in full at the end of the month, and this can be true if proper budgeting and repayment habits are practiced by cardholders who are using this particular line of credit. However, in order for a consumer to benefit from using a secured credit card in this fashion, they need to deal with a reputable lender who will report their credit card activity to the major credit bureaus.
Since this is usually what occurs in a secured credit card agreement, most consumers will find that this particular type of card, despite requiring collateral and coming with a higher interest rate, can be used to a consumer’s advantage, but it is the responsibility of the consumer to first explore whether this card is right for them, if they can handle the responsibilities that come with using a secured credit card, and consumers must remember that if they do keep a balance and interest charges start to become problematic, missed payments will not only result in the loss of collateral but can do further damage to the cardholder’s credit score.