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Establishing credit with a secure credit card account.


Possession of credit cards enables people to take advantage of the numerous benefits offered.

In many developed countries, credit cards have become a primary way of paying for goods and services and in some places, including the U.S., Japan and others, credit cards have made “old forms of payment” like writing a check or paying cash almost obsolete. Credit cards as a means of payment is also conquering less developed countries, and it is fast becoming a “money making machine” for banks. Another reason for the increasing widespread use of credit card accounts is the fact that a credit card is proof of financial responsibility and a necessity for renting a car, booking a hotel room or purchasing an airline ticket.

Getting your first credit card.

Credit card accounts are essentially unsecured loans, and banks offer them to people with established credit. There’s no collateral that guarantees the repayment of the loan. For most people, it is quite hard to get their first credit card if they have no credit history. The exceptions include students who are enrolled in college at the time of applying for a credit account.

Opening a secure credit card account.

For people with no credit history, a secure credit card is an excellent way of getting their first card and establishing credit. However, before the credit card application is approved, one needs to open a savings account which will act as collateral in case the money owed to the bank is not repaid on time. The bank will issue a credit card in your name and keep track of how you handle the account. If you do not fail to pay as agreed, with time, your credit line will increase and eventually the bank will return the original deposit. The process takes at least 12 months depending on the bank.

Secure credit card fees, terms, and credit limit.

Secure credit accounts are opened on much worse terms than credit cards offered to people with good credit history. Most of them have annual fees ranging from several to, in some cases, over 100 dollars. The annual fee appears on the first statement. Your credit limit is the amount of the bank deposit. Many secured credit cards allow only a portion of the credit limit to be used for cash advances, which is a bit ironic, since the bank is already holding your money.

Swiping A Credit Card
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Other terms for a secured credit card are similar to regular credit card accounts. They have a fee for going over the credit limit, and fees for taking cash advances. If the card carries a balance, the minimum monthly payment is set at 5 percent or less of the overall credit limit. Secure credit cards usually do not offer perks that regular cards do, like earning mileage with airlines, or getting cash back on purchases. However, some banks offer secure gold credit cards, which have a set of privileges, e.g. collision waiver protection if you use the card to rent a car.

All credit cards, whether secure or non-secure, have standard consumer protections against dishonest merchants and bad merchandises. But those protections are usually limited to the area where the card holder lives.

Credit accounts can help fix damaged credit.

There are situations in life when someone’s credit is damaged to the point that some or all credit accounts are closed by the creditors. A secure credit card can be the only way of getting back on the path of fixing one’s credit in order to be able to get loans in the future. Fixing bad credit with a new secure credit card account is a future ticket to financing big purchases, which might include a car or a house.

See Also: prepaid credit card, comparing credit cards

Related Topics: credit card terminal




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